Traditional pay TV services are looking out over the edge of a cliff, as streaming giants like Netflix and Amazon get ready to take their place.
Those are not the words of an analyst, but a high-level executive – MultiChoice South Africa CEO Calvo Mawela.
“We are an established, mature industry that is looking out over a cliff,” Mawela told MyBroadband.
He also argued against new regulations on the pay TV industry proposed by ICASA, and that the regulations will push the industry over that cliff.
Around the world, streaming video services are ruling the roost while TV broadcasters are watching the end of their run rapidly approaching.
At the annual Emmy Awards, Netflix and Amazon Prime walked away with 12 of the 26 awards. When all the Primetime Emmy Awards were handed out over the course of two weeks, Netflix and HBO tied with 23 each.
HBO, the channel behind hit shows like Game of Thrones, has always been the darling of the Emmys. Last year Netflix, broke HBO’s 17-year streak as the most-nominated network.
Netflix has invested heavily in its production of original content, with the company projected to spend $13 billion (R190 billion) on its shows and movies in its current financial year.
While the scale of Netflix’s investment is second to none, Amazon and YouTube have stepped up their production and content acquisition.
Last year saw Amazon airing shows like Tom Clancy’s Jack Ryan, The Romanoffs, and Kung Fu Panda: The Paws of Destiny. It will also continue production of titles like The Grand Tour, and benefit from distribution deals on shows like American Gods.
New science-fiction and fantasy shows like The Dark Tower, The Wheel of Time, Good Omens, and The Expanse are also coming on Amazon.
YouTube has released solid original shows in the past year, too, although its YouTube Premium service is only available in a handful of countries.
Some of its original shows are Origin, Youth & Consequences, and Step Up: High Water.
While YouTube is making a slow play for the subscription video on demand market, its core service of advertising-supported user-made content continues to be popular.
The most recent data about the pay TV market shows that cable and satellite companies in Europe and the US are either stagnating or bleeding subscribers.
Traditional pay TV providers in the US experienced a record 3.7% drop in subscribers to during 2017, according to S&P Global Market Intelligence.
eMarketer added that 186.7 million adults in the US will watch traditional pay TV in 2018, representing a 3.8% decline compared to the year before.
High prices are a major reason for these declines, and Leichtman Research Group reported that pay-TV subscribers were spending around $107 per month. Netflix’s HD service is available for $11 in the US.
In South Africa, MultiChoice has already started seeing a decline in its DStv Premium subscriber base – following US trends.
While DStv’s overall subscriber base continues to grow, this growth mainly comes from lower-end, less-profitable subscribers.
DStv’s revenue and operating profit is still growing for the moment, though its average revenue per user (ARPU) has declined. At the end of March, MultiChoice’s ARPU was R344 – down from R353 last year. By the end of September, ARPU decreased to R335.
It’s not clear for how long the more affordable DStv services will continue to grow, as factors influencing the uptake of streaming video – and cancellation of pay TV – are access to affordable broadband, live sports, and price.
As cheap, high-speed broadband becomes more available in South Africa and the rest of the continent, it stands to reason that more people will take up cheaper streaming video services.