Parks: Smart TV Penetration Changing Business Models
The growing popularity of internet-based skinny bundle live TV services, enabled by swelling penetration of smart TV and streaming device ownership in the United States, is gradually taking its toll on traditional subscription-based television viewership.
Just last week, AT&T Communications CEO John Donovan declared that DirecTV has launched its last satellite, as the company moves to embrace the transformational shift to internet delivered video services that can be personalized and delivered more cost effectively. Meanwhile, the U.S. marketplace is almost ready for the change.
A newly released study from analytics firm Parks Associates, found that Smart TVs and streaming media player ownership in U.S. broadband households is more pervasive than with, with household ownership of the former more than doubling from 21% to almost 40% since 2014, while homes with integrated smart TVs have increased to 53% this year from 34% in 2014.
Furthermore, the research found that 83% of smart TV owners are steadily connecting their devices to the internet, up from 70% in 2014.
The news is disrupting the game plan of companies with heavy investments in traditional subscription-based televisions services, like cable, telco and satellite television providers, which continue to suffer declines to their pricey tiered multichannel services as more and more subscribers opt to cut the cord.
To counter, some providers, like direct-to-home satellite TV operators AT&T DirecTV and Dish, have implemented their own live streaming skinny bundle services, DirecTV Now and Sling TV, respectively, which both have done well.
Cable operators are taking similar paths, while still enjoying the benefit of providing the broadband services need to stream these alternatives.
In a statement to analysts last week, AT&T’s Donovan reportedly announced, “We’ve launched our last satellite.”
This was a reference to the company’s decision to begin a slow transition away from satellite-based TV delivery to internet based platforms, and business structures like DirecTV Now. Costs of cloud-based delivery systems are rapidly declining, but not known is how this will impact available bandwidth or the delivery of data-intensive high-resolution video platforms like 4K and 8K Ultra HDTV.
Details of this transition were scant in Donovan’s statement. Clearly, the company is positioning itself to benefit from its increasing control of key content sources, like the NFL Sunday Ticket and the acquisition of Time Warner assets.
But the full changeover of DirecTV’s 20 million satellite subscribers to internet-based program delivery isn’t likely to occur overnight, and will require significant infrastructure investments in new home set-top boxes, even if they are installable by end users rather than by service technicians. In the meantime, DirecTV’s fleet of existing satellites will be in orbit for a number of years.
As for the end of satellite TV, additional opportunities likely await there. Dish’s Chairman Charlie Ergen has not yet issued a statement on the future direction of his company’s satellite plans.
The distribution changeover isn’t necessarily bad news, even for the service providers.
“More connected devices open more opportunities for streaming and OTT services in the home, prompting more service announcements such as AT&T’s plans to offer a tiered video streaming service,” stated Elizabeth Parks, SVP, Parks Associates.
The market research firm will be covering some of these rapidly changing developments in its first “Future of Video” conference December 10-12, in Marina del Rey, California. Two key sessions, “Distribution Opportunities and Challenges for Content Producers” and “Future Video Services: How VOD, Linear, OTT, and Pay TV Come Together,” will address challenges that exist for stakeholders in video content as they search for the best opportunities to distribute their content.
Scheduled speakers include:
Jon Cody, CEO/Founder, TV4 Entertainment
Ryan Curry, Head, Tech and Innovation, Combs Enterprises
Scott Ehrlich, VP, Emerging Platform Content, Sinclair Broadcast Group
Thomas Elam, VP, GM, Service Provider Business, TiVo Corporation
Joel Fineman, Director, Publisher Development, Premion
Bruce Littman, EVP, Content Distribution, One America News Network / AWE
Gary Schanman, SVP, Video Products, Charter
Anthony Smith-Chaigneau, Sr. Director Product Marketing, NAGRA
Stephen Strong, VP, Strategic Partnerships, News
Don Wilcox, Vice President, Multiplatform Marketing & Content, PBS
“The rise of direct-to-consumer offerings and the blurring of lines between pay-TV and OTT are leading to increased fragmentation in the viewing experience, where consumers are having to face complex self-curating systems,” added Anthony Smith-Chaigneau, senior director product marketing, Nagra.
“To address this, service providers must become ‘smartly digital’ – by embracing cloudification, actively claiming the aggregation role, and leveraging data-driven principles to define and evolve their consumer propositions.”
By Greg Tarr
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