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Pay TV absorbs the streaming revolution

Disney+’s The Mandalorian

The revolution brought about by streaming services has to a large extent upturned the old ‘big basic plus premium’ model of pay TV. But does this mean that pay TV as a business is on its knees?

The streaming revolution is far from over. This week brought news from the latest edition of the American Customer Satisfaction Index that Disney+ had edged Netflix from the top spot in its streaming category only six months after launching.

Disney, which reported 54.5 million subscribers for the service only six months after launching, scored a satisfaction rating of 80 the same six months after launch, ahead of Netflix whose score slipped 1% to 78.

Disney+ is certainly going from strength to strength – and not only in the US. This week also brought news – courtesy of DTVE sister research house Omdia – that the Mouse House’s streaming offering was now the third-largest SVOD provider in the UK, with 4.3 million subscribers.

As well as serving as a sign that Disney’s streamer is by far the best placed among new entrants to give Netflix a serious run for its money, the ACSI rankings predictably showed that streaming services are much more highly rated in terms of the satisfaction they provide than traditional pay TV providers.

However, the rankings also showed pay TV making something of a modest comeback in terms of customer satisfaction, on average rising by 3.2% to achieve a mean score of 64.

This could be a sign that competition and cord-cutting are forcing pay TV operators to up their game to stay in business. It certainly shows that even in the US, where complacency fuelled by service providers’ ability to generate high ARPU from extremely pricey services without much competition has led to millions of subscribers voting with their feet, the game is not yet played out.

Typically, the US pay TV operators that scored highest in the survey or improved their ratings year-on-year were the cable and telecom players that bundle the service with broadband such as Comcast’s Xfinity – the highest riser – and Verizon’s FiOS. Satellite services scored badly and saw their ratings decline.

The key markers of success in the ACSI rankings were primarily things like HD picture quality and courtesy and helpfulness of call centre staff. But there are plenty of signs that bundling and aggregation can help bolster pay TV as a business model.

On the bundling side, this week saw a report from regulator ANACOM in Portugal indicating that pay TV uptake is still growing solidly in that market, primarily driven by bundled offerings over fibre-to-the-home networks, with satellite pure-play pay TV offerings declining.

Pay TV service providers that bundle their offerings with broadband also have the ability to deliver high-quality and reliable delivery of streaming apps to the set-top box, so that the popularity and high ratings accorded to streamers can begin to rub off on dusty old pay TV services too.

That has driven a move by many pay TV providers to the aggregation model, offering access to multiple apps that are technically integrated and – increasingly – offered as part of a commercial consumer package too.

The latest pay TV operator to sign up to this model is South Africa’s MultiChoice – long a holdout against the aggregator model – which this week revealed that it had agreed to add Netflix and Amazon Prime Video to its TV offering.

Pay TV providers and streamer alike also increasingly take the view that customers like the idea of paying for multiple services via a single bill. This week saw sports streamer DAZN launch direct carrier billing with Telefónica and Swisscom in Germany and Switzerland respectively.

Pay TV is certainly not dead – another research report this week predicted that, far from falling victim to cord-cutting, two thirds of pay TV providers globally will gain subscribers over the next five years – but it is evolving, with the distinction between the ‘traditional’ model of a set of bundled channels and associated on-demand content on one hand, and that of the pure OTT streamer, becoming ever more blurred.