Future of Pay Television

Folks who subscribe to paid video content will be using one of these means -  satellite television, traditional cable (include comparable IPTV offerings from the telcos), OTT services (Netflix, Hulu Plus, Amazon Prime, HBO Go etc.)

Satellite television is here to stay. For one the satellite television providers have a national reach. In some cases they have an international reach. DirecTV and Dish can sign up any household in USA. In contrast Comcast does not have a pipeline into majority of the households in USA.

Traditional Cable is a dying market. It is like the landline telephone market in 1999. Comcast has tried to make themselves relevant by purchasing content providers. One major difference from the landline telephone analogy Comcast still owns the broadband pipe.

The OTT players are the future in the long run. Netflix has taken the lead. The big issue for the OTT players is content. They are at the mercy of the Hollywood Studios who still get more revenue from Satellite and Traditional Cable subscribers. The obvious strategy of Netflix is to get bigger in terms of subscriber base. This would allow them to negotiate better deals with the content providers. In theory the content providers could offer a Netflix style service to undercut Netflix.

The wildcards in the future of pay television market are improvements in the wireless network capabilities, interpretation of net neutrality by the different players, legality of the bandwidth caps, broadband networks in emerging market and consolidation of content providers.

Currently there are two choices for broadband access in USA - your local cable company or your local telephone company. Improvements in the wireless network should allow for cellular carriers to stream video from OTT services to subscribers. That would add a third choice. It would improve the prospects for OTT players.

Net neutrality is influenced by politics. Generally the Republicans favor the incumbents - cable companies and telcos. The Democrats favor the Silicon Valley and the venture capitalists. The last time politics played out was in 2001. The election of the Bush in 2001 sealed the fate of the CLEC - competitive local exchange carriers.

Bandwidth caps is an hard issue. Moving to 4K content increases the pressure on the networks. It is going to be hard to increase the bandwidth available for video streaming unless consumers pay for it. That works in the favor of the cable/telco offerings.

The quality of the Broadband networks in emerging markets is poor. In general the quality and bandwidth is not suitable for unlimited video streaming. This should limit the expansion plans of the OTT players like Netflix.

Right now most of the content is owned by Comcast, Disney, CBS, Viacom, News, Time Warner and Liberty Media. It is hard for any new entrant to build a large content library to compete with the existing players

In short look for slow and steady gains in OTT subscribers in contrast to slow steady declines in subscribers to the traditional pay television industry.