NAGRA: Industry Approaching ‘Peak Investment’ in Content

Despite standalone OTT services seeing continued subscriber growth — and while traditional pay TV operators continue seeing the exact opposite — many media and entertainment executives say the industry is hitting a peak in terms of content investment, and that too many shows may be in production.

That’s according to U.S. findings from the “Pay TV Innovation Forum” report from content protection and multiscreen TV solutions provider NAGRA, which sees U.S. M&E executives optimistic, but worried that consolidation, competition and commercial pressures will impact future spending on content.

“For content providers, the main priority for the next few years will be to manage the transition to a more diverse distribution environment – launching new DTC [direct-to-consumer] offerings and developing new revenue streams, while protecting existing revenues from affiliates, advertising and program sales,” the report reads.

The industry as a whole is optimistic about the ability of pay TV operators to adapt, by re-structuring traditional packages with fewer linear channels and a more diverse range of prices and package offerings. OTT isn’t exactly the enemy either: many executives reported that OTT services are complimentary to pay TV services, though some see Disney+ — if bundled with Hulu and ESPN+ in an affordable package — as an “existential threat” to traditional pay TV services.

After a long period of sustained growth for traditional pay TV players between 2010 and 2016, those operators lost a combined 3.2 million traditional subscribers in 2018. Meanwhile, standalone OTT services have seen their subscriber numbers continue to grow. That sees traditional operators continue to adapt to a changing environment, according to the report.

“The 2019 U.S. edition of the ‘Pay TV Innovation Forum’ showcases the massive opportunity available for industry players who can understand current market dynamics and implement the right strategies to remain competitive in today’s and tomorrow’s U.S. media and entertainment space,” said Simon Trudelle, senior director of product marketing for NAGRA. “At NAGRA, we are on the forefront of this unprecedented industry change, helping executives embrace and adapt to the evolving business landscape so that they can implement smart strategies that will set them up for long-term success.”

Jon Watts, managing partner for research firm MTM, added: “The U.S. pay TV market continues to face a period of change. We’re seeing a more complex, competitive market emerge rapidly, with a far more diverse range of pay TV offerings and strategies on display. The U.S. executives participating in this year’s Forum remain broadly optimistic about the prospects for the pay TV industry in the 2020s, but they are also clear that business-as-usual is no longer sufficient.

“Most major U.S. companies are well advanced in developing their strategies, placing big bets on the future and rolling out new offerings — but there are lots of uncertainties ahead. The decade ahead promises to be a fascinating period for the industry.”