With the advent of OTT, Pay TV already saw an increase in the number of cord-cutters. The availability of content at will was taking a toll on waiting for fixed slots for shows and movies to air. As traditional Pay TV operators were trying to develop new ways to stay in the game, a bomb called Covid was dropped upon the world, and all plans came to a halt.
The deadly pandemic further accelerated the cord-cutting trend and put Pay TV in trouble. Earlier, increasing broadband penetration in mature markets was the largest factor responsible for decreasing Pay TV subscriptions. But with coronavirus, the emerging market, too, started moving the mature market way and subscribing lesser and lesser to the traditional Pay TV services.
The Rise of OTT and Impact on Pay TV
How did the OTT spiral affect Pay TV in the first place? Widespread internet adoption meant that more and more users had access to online content. It also meant that they could utilize the time that they spent on a commute or other activities where they weren’t involved more productively and more engaged, with the decreasing rates of mobile internet services.
Over a period of time, these users were hooked on to the content on OTT platforms. Just as a child craves candy, these users started craving the varied and vast content available on platforms like Netflix, Amazon Prime, Hulu, Apple TV, etc. The only difference is that a child is not given all the candy he or she craves. But there was no one to stop these adult users from consuming their candy.
No longer did one have to go through the TV guide to figure out what time their favorite movie or show was going to air. No longer did they have to plan their appointments around the showcase of their favorite soap opera on TV. They could just watch whenever they wanted, on one of the OTT platforms. Why then would they be willing to pay for a subscription for Pay TV then, when all the content was available online?
You would argue that one would have to resort to traditional Pay TV for news and sports. But OTT took care of that as well. It was now possible to watch matches from the office as well, without having to call in sick to see Virat Kohli hit a sixer and lead the men in blue to victory. It’s possible to consume news on the go without having to wake up a half-hour earlier to catch hold of the morning news. What purpose did Pay TV then serve?
If you think losing revenue from subscribers was the only blow to Pay TV, think again. OTT became the new preference for advertisers, and the Pay TV industry was fast losing its ad revenues. One can’t blame the advertisers here. They are bound to display their ads on platforms with a greater user base to increase their chance of being viewed.
Covid Impact on OTT and Pay TV
When people were forced to hunker down due to the deadly coronavirus, the expectation was for viewing hours for OTT and Pay TV to increase as people sought more and more content. This expectation was definitely met, but what was startling was that the OTT viewership for HBO went up by almost 40%, when the overall TV viewing went up by just 20% across the US. It wasn’t just HBO that benefited from global lockdown. In one particular week, Disney saw a rise of 212% in its sign-ups as compared to its previous week.
Consumers might have preferred to keep their Pay TV subscriptions along with OTT ones. But the pandemic put millions of people out of work. With job losses and pay cuts happening left, right, and center, people were forced to cut down on expenses. And Pay TV was one of the first industries after tourism and hospitality to take a hit. The amount of content available on OTT made it more preferable over traditional TV viewing.
The one glue that was still holding the Pay TV industry together was the airing of sports events. And the pandemic took that away as well. Prior to Covid, people still preferred to view their favorite players in action on the telly as they did not have to pay significantly more money for a particular match, whereas they would be required to subscribe to the particular OTT platform that was showcasing the match. Post-Covid, since more users have already taken up subscriptions for multiple OTTs, they prefer to cord-cut and watch sporting events on these platforms.
Opportunities for Pay TV and the Way Forward
Evolution happened because every species has the beauty to adapt to its surroundings. And the same goes for businesses. Innovations happen as businesses losing revenues come up with new and unique solutions to cut losses and flourish in the wake of adversity.
Pay TV operators are now looking at integrated solutions where, in addition to their broadcasting services, they will provide on-demand videos and short clips, similar to YouTube. And they are looking at partnering with various content providers for the same. It would be wrong to say that Pay TV would be in direct competition with OTT, as they will have to strike a balance between their traditional business model as well as the new territory they are planning to enter.
Players like Zee have already started discussing launching pay-per-view services where movies will be available for rent as well as for sale on their television network.
Another way in which Pay TV is looking to boost its falling revenues is by allowing users to stream their favorite channels on their mobile phones and enabling them to consume content on the go. At the same time, they are considering launching personalized and targeted advertising and not displaying the same ads to every user, irrespective of their demographics and preferences.
It’s not very easy to ultimately shift their business model for any company. But that’s the only option if Pay TV is to survive. They will have to find a way for data collection and analysis to go the OTT way and will have to establish the relevant infrastructure.
Having said that, necessity is the mother of all inventions, and where there is a will, there is a way. The future is not as bleak as it initially seemed. There’s a way out, and Pay TV vendors need to find that path and embark upon the new journey.