Technology | Media | Telecommunications

Friday, July 20, 2018

Robotics and Drone Revenues will Reach $201.3 Billion

Worldwide spending on robotics and drones solutions will reach $201.3 billion in 2022 and achieve a compound annual growth rate (CAGR) of 19.6 percent over the 2017-2022 forecast period, according to the latest market study by International Data Corporation (IDC).

Spending on robotics solutions is expected to total $86.6 billion in 2018 and will account for more than 85 percent of all spending throughout the five-year forecast. Industrial robotic solutions will account for the largest share of robotics spending (more than 57 percent), followed by service robots and consumer robots.

Discrete and process manufacturing will be the leading industries for robotics spending at more than $54 billion combined in 2018. The resource and healthcare industries will also make significant investments in robotics. That said, the retail and wholesale industries will see the fastest robotics spending growth over the forecast with CAGRs of 32.7 percent and 30.7 percent, respectively.

Robotics and Drone Market Development

"Collaborative robots are taking off in industrial applications, driven by customer demands for product quality, delivery, and mass customization," said Dr. Jing Bing Zhang, research director at IDC. "While being safe is the prerequisite for any collaborative robot, the market is already shaping the development of collaborative robots towards simplicity, smartness, and ease of redeployment."

Worldwide drone spending will be $9.3 billion in 2018 and is expected to grow at a faster rate than the overall market with a five-year CAGR of 32.1 percent. Enterprise drone solutions will deliver more than half of all drone spending throughout the forecast period with the balance coming from consumer drone solutions.

Enterprise drones will increase its share of overall spending with a five-year CAGR of 37.1 percent. The utilities and construction industries will see the largest drone spending in 2018 ($925 million and $808 million, respectively), followed by the process and discrete manufacturing industries. Key growth in drone spending will come from various industries including education (72.8 percent CAGR) and federal or central government (70.1 percent CAGR).

The use cases that will capture the largest share of robotics and drones spending are driven by their respective industries. As the primary use case in the Discrete Manufacturing industry for robotics, welding is forecast to receive over 15 percent of all robotics spending worldwide throughout the forecast. Other robotics use cases that will drive spending include assembly, painting, mixing, automated production in mining, and pick and pack.

The use cases that will see the fastest growth in robotics spending over the forecast period include break bulk (53.4 percent CAGR), shelf stocking (45.6 percent CAGR), and customer service (42 percent CAGR). For drones, the use cases that will see the fastest growth over the forecast period include dispensing pesticides and fertilizer (109.4 percent CAGR), emergency service (86.4 percent CAGR) and precision agriculture/crop scouting (86.1 percent CAGR).

More than half of all robotics spending this year ($58.1 billion) and throughout the forecast will go to robotics systems, after-market robotics hardware, and systems hardware.

Services-related spending, which encompasses application management, education & training, hardware deployment and support, systems integration, and others will total more than $16.7 billion in 2018 while spending on command and control, specific robotics applications, and network infrastructure software will reach $11.8 billion.

Purchases of drones and after-market drone hardware will be nearly $7.9 billion in 2018 while spending on command and control, specific drone applications, and network infrastructure software will reach $611 million.

The Outlook for Regional Market Growth

On a geographic basis, China will be the largest geographic market for robotics, delivering more than 30 percent of all robotics spending throughout the forecast, followed by the rest of the Asia-Pacific region (excluding China and Japan), the United States, and Japan.

The United States will be the largest geographic market for drone spending at $4.3 billion in 2018, followed by Western Europe and China. However, according to the IDC assessment, exceptionally strong spending growth in China (63.2 percent CAGR) will move this market ahead of the United States by 2022.

Tuesday, July 17, 2018

How NFC is Penetrating Retail Point-of-Sale Apps

While much of retailer digital transformation continues to drive online commerce applications, innovation is advancing the whole sector. Retail point of sale (POS) technologies is an example, as more CIOs and CTOs seek ways to improve in-store product or service payment transaction processing.

According to the latest worldwide market study by Berg Insight, the market for NFC-ready POS terminals continued to show strong momentum in 2017 with annual shipments reaching an estimated 24.7 million units worldwide.

Retail POS Market Development

The attach rate for near field communications (NFC) was highest in EU28+2 and North America markets, where 90 percent and 88 percent respectively of the POS terminals shipped featured NFC.

NFC was also a very popular feature in many other major markets worldwide -- including Brazil, Turkey and China. On a global basis, almost three out of every five POS terminals shipped in 2017 included NFC.

Berg Insight projects the global installed base of NFC-ready POS terminals will grow at a compound annual growth rate (CAGR) of 15.6 percent from 54.5 million units in 2017 to 112.3 million units in 2022. As a result, more than 78 percent of the world’s POS terminals will be NFC-ready in 2022 -- that's up from 50 percent in 2017.

According to the Berg Insight assessment, while the installed base of NFC-ready POS terminals has grown quickly, the contactless technology has in many cases not been activated.

This is now changing and Berg Insight estimates that approximately 30 million POS terminals accepted contactless payments with Visa payWave, MasterCard PayPass or UnionPay Quickpass at the end of 2017.

"The mobile point of sale (mPOS) terminal market is growing faster than the traditional POS terminal segment and there are more than 70 vendors active on the global market today" said Johan Fagerberg, principal analyst at Berg Insight.

Furthermore, mPoS is the use of consumer-oriented mobile devices such as tablets and smartphones that function as a point-of-sale terminal to facilitate payment card transactions through a connection to a card-accepting reader.

Outlook for mPOS Technology Adoption

The attach rate for NFC in the mPOS segment reached 53 percent in 2017 as NFC-ready mPOS terminal shipments reach 9.7 million units. Berg Insight forecasts that global shipments of NFC-ready mPOS terminals will grow at a compound annual growth rate (CAGR) of 28.9 percent in the next five years to reach 34.5 million units by 2022.

"The growth is driven by the increase in mPOS terminal shipments from 18.3 million units in 2017 to 40.7 million units in 2022, as well as by a growth in the attach rate from 53 percent to 85 percent," concludes Mr Fagerberg.

Friday, July 13, 2018

Personal Computing Outlook Reflects Ongoing Change

The global adoption of public cloud computing services, the increased performance of smartphones and the demand for Chromebooks continue to negatively impact the rest of the consumer electronics market and to a somewhat lesser degree the enterprise IT marketplace.

Results for the second quarter of 2018 (2Q18) showed shipments of traditional personal computers (PCs) totaled 62.3 million units -- that's a year-on-year growth of just 2.7 percent, according to the latest worldwide market study by International Data Corporation (IDC). While it's a relatively small improvement, it's actually better than IDC's initial forecast of 0.3 percent growth.

Personal Computing Market Development

Although helped to some extent by a weak second quarter in 2017, which was somewhat impacted by key component issues, the 2Q18 results reversed the trend from the previous three quarters, which had the market hovering slightly above or below flat growth.

Business volume appeared to be the key driver with the top three vendors reaping benefits across both desktop and notebook computers. Moreover, the market continued to grow for both premium as well as entry models. Chrome OS-based devices, premium notebooks, and gaming PCs all further fueled the mix in the wake of improved supply and prices of graphic cards.

Not surprisingly, the recovery is relegated to the highest echelon of the market as the top five vendors all posted positive year-on-year growth, collectively growing over 7 percent and capturing nearly 78 percent of the overall market.

According to the IDC assessment, scale continued to be the catalyst for industry consolidation. Plus, many smaller consumer electronics manufacturers have chosen to abandon the PC and media tablet marketplace due to shrinking global demand.

From a geographic perspective, all regions exceeded forecast, with both mature and emerging markets seeing good activity. The U.S. market delivered another growth quarter after coming in just below flat in 2017.

"Although traditional PCs may not be the default device for many usage scenarios, the market continues to show pockets of resiliency as PC usage experience evolves and improves," said Jay Chou, research manager at IDC. "Even certain types of desktops are seeing growth amid this business-driven refresh cycle."


PC Market Regional Highlights

United States: The traditional PC market registered its second consecutive quarter of year-on-year shipment growth with a total of 17.3 million units. The desktop market saw shipments rising after a long decline with growth being driven by increased commercial purchases and supported by growing consumer demand for gaming systems. The enterprise shift to Windows 10 and an overall positive economic environment also helped maintain momentum on the notebook side.

Europe, the Middle East and Africa (EMEA): The traditional PC market experienced modest growth, owing to a further wave of device renewals in the commercial space. Despite the trend toward mobility, desktops once again played a strong role in driving the overall performance of the market.

Asia-Pacific (excluding Japan) (APeJ): The traditional PC market came close to IDC's forecast, supported by positive results in India, where better than expected consumer demand and good traction in the commercial market drove shipments. Meanwhile, the Department of Education project contributed to a strong increase in the commercial space in the Philippines.

China: The PC market in China performed above expectations, as better than forecasted sales and the launch of new models during the 618 Festival contributed to higher sell-in of consumer notebooks. On the other hand, the China commercial PC market remained impacted by weak shipments to SMBs and the public sector.

Japan: The market came in above expectations as commercial demand helped desktop and notebooks alike to exceed the forecast.

Thursday, July 12, 2018

How Smart Retail Technology Fuels In-Store Innovation

Savvy CIOs and CTOs in the the retail sector have embraced new technologies that enable them to evolve their business models -- both in-store and online. In particular, automation applications that improve productivity are likely to receive significant IT investment.

Artificial Intelligence (AI), computer vision and robotics will ultimately enable retailers across the globe to provide improved customer experiences, streamline legacy business processes, and increase diminishing profit margins.

Smart Retail Tech Market Development

Brick and mortar retailers can, therefore, improve their chances of remaining competitive if they employ these technologies correctly, prioritizing long-term investment over short-sighted strategies, according to the latest worldwide market study by ABI Research.

"The high-cost barrier associated with AI, computer vision and robotics will ultimately be overcome by the potential for these technologies to offset the inherent disadvantages facing physical stores today," said Nick Finill, senior analyst at ABI Research.

In 2025, traditional brick and mortar retailers will spend $34 billion on AI technologies -- that's up from just $4 billion in 2018. According to the ABI assessment, computer vision will account for 29 percent of this IT spending.

This is due to the technology’s ability to facilitate real-time inventory status reports, advanced customer analytics, and checkout-free retail models -- all of which rely on AI-enabled cameras.

As a result, ABI Research now forecasts that over 44,000 checkout-free stores will have been deployed by 2023, with the Asia-Pacific market being home to the clear majority of these retail outlets.

Moreover, robots will also be increasingly deployed by forward-thinking retailers that want to improve their customer support and manage inventory more efficiently and precisely. By 2025, it's estimated that 167,000 robots will be in operation in physical retail stores globally, most of which will be used to monitor the contents of store shelves.

These retail-oriented robots, offered by companies such as Simbe Robotics and Bossanova, will see widespread deployment in large format stores in regions with high labor costs and strong robotics initiatives -- such as North America, Europe, and East Asia.

"In the store of the future, robots and computer vision cameras will essentially act as data-generating eyes, feeding an AI brain which can proactively respond to stimuli and predict trends at the micro and macro level," Finill added.

Outlook for AI, Computer Vision and Robotics

Smart technologies -- including AI, computer vision and robotics -- when integrated with a store’s wider network of information systems, represent enormous potential to retailers desperate for actionable insights, operational excellence, and satisfied customers within their physical stores.

The most progressive retailers, which can most effectively combine these advanced capabilities to improve their competitive position, will likely see the greatest long-term return-on-investment (ROI).

Monday, July 09, 2018

Why Retailer Chatbot Apps Gained New Momentum

Automation can improve commercial productivity by achieving exponential improvements in business performance. Within the digital transformation realm, chatbots hold the potential to replace the tasks of many human workers with Artificial Intelligence (AI) capabilities that are able to conduct fluent conversations.

Analysts describe chatbot technologies as computer-based interactive services that utilize software apps designed to simulate conversational capabilities, which may also include automated business processes triggered from these interactions.

Chatbot Application Market Development

Chatbots are becoming increasingly influential in our day-to-day life. They have been developed to assist a range of industries, from simple banking transactions, to retail customer service enquiries. In fact, the financial services and retail sector are considered most likely to explore chatbot apps.

Online retailers, in particular, are being attracted to the technology by the potential for monetization opportunities from up-selling, marketing and shopping cart recovery -- as well as a large global tech-savvy online user base.

According to the latest worldwide market study by Juniper Research, the adoption of chatbots across the retail, banking and healthcare sectors will realize business cost savings of $11 billion annually by 2023 -- that's up from an estimated $6 billion in 2018.

The research found that these cost savings will be derived from the reduced amount of time spent on customer service enquiries. Using chatbots, online businesses will dramatically cut response and interaction times via phone and social channels.

As a result, consumers and businesses could save over 2.5 billion hours by 2023 in these key industry sectors. The study found that the retail sector will gain the most benefits from chatbot technology, with Juniper estimating that by 2023 over 70 percent of chatbots accessed will be retail-based.

Juniper analysts highlighted both customer service and eCommerce as key use cases, although they cautioned that greater investment in chatbot functionality will be required to meet consumer expectations.

In that context, Juniper forecasts that improvement in AI would likely create a more personable user experience and would be fundamental in creating a compelling pull-factor for chatbots.

Juniper cited benefits, such as ongoing cost savings, as major retailer chatbot push factors. Retailers will take advantage of these opportunities; propelling chatbot implementation and driving eCommerce transactions via chatbots to reach $112 billion by 2023.

Outlook for Mobile Chatbot Apps

The research found that while mobile messaging applications have been the space where chatbots first flourished, chatbot-enabled mobile apps in use will greatly increase as many retailers, financial institutions and healthcare providers integrate the technology into their environment.

By 2023, Juniper forecasts that over 50 percent of the chatbots accessed will be through discrete applications, with complete bot integration overturning the make-up of current app functionality.

Friday, July 06, 2018

Digital Dexterity: Exploring the New Ways of Work

As more progressive business leaders choose to support mobile, team-oriented and non-routine ways of working, an increasing number of them are looking for assistance in adopting digital workplace technology. But why are they searching for actionable information and qualified guidance?

According to the findings from the latest Gartner survey, only 7 to 18 percent of organizations possess the 'digital dexterity' to adopt New Ways of Work (NWOW) solutions -- such as virtual collaboration and a mobile workplace. Furthermore, it's already apparent that forcing employees to accept rigid and inflexible workplace mandates are a recipe for poor performance.

Ongoing Change Reshapes the Workforce

According to the Gartner assessment, an organization with high digital dexterity has employees who have the cognitive ability and social practice to leverage and manipulate media, information and technology in unique and highly innovative ways.

By country, organizations exhibiting the highest digital dexterity were those in the U.S. (18.2 percent of respondents), followed by those in Germany (17.6 percent) and then the UK (17.1 percent).

"Solutions targeting new ways of work are tapping into a high-growth area, but finding the right organizations ready to exploit these technologies is challenging," said Craig Roth, research vice president at Gartner.

In parallel, the survey found that workers in the United States, Germany and UK have, on average, higher digital dexterity than those in France, Singapore and Japan.

Workers in the top three countries were much more open to working from anywhere, in a non-office manner. They had a desire to use consumer software and websites at work. Some of the difference in workers' digital dexterity is driven by cultural factors, as shown by large differences between countries.

For example, population density impacts the ability to work outside the office, and countries with more adherence to organizational hierarchy had decreased affinity for social media tools that drive social engagement.

The youngest workers are the most inclined to adopt digital workplace products and services. They have a positive view of tech in the workplace and a strong affinity for working in non-office environments. Nevertheless, they reported the lowest levels of agreement with the statement that 'work is best accomplished in teams'.

The survey also showed that the oldest workers are the second most likely adopters of NWOW. Those aged 55 to 74 have the highest opinion of teamwork, have progressed to a position where there is little routine work, and have the most favorable view of all age groups of internal social networking technology.

Embracing vs Resisting Workplace Change

In contrast, workers aged 35 to 44 were at the low-point of the adoption dip, potentially feeling fatigued with the routines of life as middle age approaches. They were most likely to report that their jobs are routine, have the dimmest view of how technology can help their work, and are the least interested in mobile work. Moreover, larger organizations on average had higher digital dexterity than smaller ones.

"Embracing dynamic work styles, devices, work locations and team structures can transform a business and its relationship to its staff. But digital dexterity doesn't come cheap," said Mr. Roth. "It takes investment in workplace design, mobile devices and software, and larger organizations find it easier to make this investment."

Leaders that insist on a 'one-size-fits-all' approach to NWOW are doomed to fail.

Wednesday, July 04, 2018

Internet of Things Platform Market Reaches Maturity

CIOs and CTOs report that they continue to explore new internet technology apps. According to the latest worldwide market study by Berg Insight, the global market for the Internet of Things (IoT) device management and application enablement platforms reached $1.1 billion in 2017.

Growing at a compound annual growth rate (CAGR) of 36.2 percent, the total market value is expected to reach $4.9 billion in 2022.

Internet of Things Platform Market Development

IoT platforms provide middleware to connect and manage devices and integrate collected data into various applications and services. These platforms are intended to reduce the cost and development time for IoT solutions by providing standardized components that enterprises can build upon.

The IoT platform market is notably crowded and hosts a multitude of players spanning from small start-ups to major legacy companies in the technology and industrial sectors. These pioneers have developed offerings that typically have a specific focus on a set of capabilities, often related to their core businesses.

As an example, GE and PTC spearheaded the effort of promoting IoT in the industrial sector on a broader scale. While GE has shifted focus to mainly provide solutions rather than its Predix platform alone, PTC has emerged as the leader in the space.

The Software AG Cumulocity IoT business and the wireless IoT module vendor Telit have also built strong positions in the industrial sector. The Software AG platform has been selected by Siemens to complement its IoT operating system MindSphere.

Telit holds a strategic partnership with Wind River that leverages their technology in its Helix Device Cloud. Additional providers with high involvement in the industrial sector include Bosch, IBM, SAP, Oracle, Exosite, Device Insight and Altair Engineering.

According to the Berg assessment, during 2017 and 2018 the major cloud infrastructure vendors will continue to invest heavily in their IoT offerings -- primarily to drive new growth in their public cloud computing business.

"The involvement of the cloud infrastructure providers will lead to commoditization of some services currently offered by vendors in the IoT platform market, and result in further specialization of IoT platform providers," said Fredrik Stålbrand, analyst at Berg Insight.

Outlook for More IoT Application Innovation

So, what does the future have in store for IoT market development and innovation. Merger and acquisition (M&A) activity has risen sharply, now the market has entered a consolidation phase.

However, some level of fragmentation in the market is expected to remain due to lack of standards, but also due to specific requirements in industries characterised by mission critical applications -- such as automotive, healthcare and manufacturing -- as well as in the critical infrastructure industries.

Tuesday, July 03, 2018

In-flight Entertainment Revenue will Reach $8.4 Billion

In-flight Entertainment has been the norm on long-haul flights for several decades. In an age where permanent Internet connectivity is commonplace, in-flight Wi-Fi and cellular connectivity is now becoming a standard as well.

Developing communications technology, the changing nature of the airline industry and the increasing desire for passengers to stay connected at all times are driving the deployment of new services.

Broadband connectivity is drastically changing the consumer passenger experience, the business passenger experience and the operational challenges aircraft operators face.

In-flight Entertainment Market Development

According to the latest worldwide market study by Juniper Research, increasing adoption of in-flight entertainment and connectivity systems by airlines and private aircraft operators will drive annual service revenues from an estimated $3.7 billion in 2018 to reach over $8.4 billion by 2023.

The research found that systems installation by Low Cost Carriers is a driving force behind this growth. In an extremely competitive environment, commercial airlines such as easyJet are utilizing these systems to differentiate the airline passenger experience.

Juniper analysts found that airlines are increasingly adopting wireless streaming to passenger devices, with penetration in commercial aircraft in West Europe reaching 31 percent by 2023 -- that's up from 23 percent in 2018.

Juniper foresees that the greater cost efficiency of these systems, compared with seatback systems, will enable the increased Low Cost Carrier deployment. Offering entertainment services in the budget segment removes a crucial differentiator for more traditional airlines. That said, Juniper recommended that one area in which legacy airlines can innovate is to offer free, high-quality passenger Wi-Fi.

With connectivity becoming a standard aircraft feature, Juniper predicted that the number of connected aircraft will grow by 118 percent between 2018 and 2023, with over 34,000 commercial and business aircraft outfitted by 2023.

Outlook for Airline Communication Innovation

Improved aircraft connectivity will be leveraged to gain service efficiency owing to predictive, more efficient maintenance, with Internet of Things (IoT) sensors utilized to reduce manual maintenance tasks and improve aircraft safety; allowing improved profit margins for airlines.

"Operational use cases and the significance of the IoT is driving innovation in the satellite sector. Increased demand can be used by satellite operators to justify high capital expenditure required to build new systems, such as HTS (High Throughput Satellites) and S band services," said Nick Maynard, research analyst at Juniper Research.

Friday, June 29, 2018

Optimal Hybrid Cloud Champions Will Lead the Market

Vendor revenue from sales of infrastructure products -- server, storage, and Ethernet switch -- for cloud IT grew by 45.5 percent year-over-year in the first quarter of 2018 (1Q18), reaching $12.9 billion according to the latest worldwide market study by International Data Corporation (IDC).

IDC also raised its forecast for total spending on cloud IT infrastructure in 2018 to $57.2 billion with year-over-year growth of 21.3 percent. Let's consider the key trends that are driving this phenomena. What really matters most, going forward?

Cloud Infrastructure Market Development

Public cloud infrastructure quarterly revenue has more than doubled in the past three years to $9 billion in 1Q18, growing 55.8 percent year-over -year. Private cloud revenue reached $3.9 billion for an annual increase of 26.5 percent.

The combined public and private cloud revenues now represent 46.1 percent of the total worldwide IT infrastructure spending, up from 41.8 percent a year ago. Traditional (non-cloud) IT infrastructure revenue grew 22 percent from a year ago, although it's declined over the past several years -- at $15.1 billion in 1Q18 it still represents 53.9 percent of total worldwide IT infrastructure spending.

"Hyperscaler datacenter expansion and refresh continued to drive overall cloud IT infrastructure growth in the first quarter," said Kuba Stolarski, research director at IDC. "While all infrastructure segments continued their strong growth, public cloud has been growing the most."

IDC expects this trend to continue through the end of 2018. Digital transformation initiatives such as edge computing and machine learning have been bringing new enterprise workloads into the cloud, driving up the demand for higher density configurations of cores, memory, and storage.


As systems technology continues to evolve towards pooled resources and composable infrastructure, the emergence of these next-generation workloads will drive net new growth beyond traditional enterprise workloads.

All regions grew their cloud IT Infrastructure revenue by double digits in 1Q18. Asia-Pacific (excluding Japan) grew revenue the fastest, by 74.7 percent year-over-year. Next were the U.S. market (43.6 percent), Middle East & Africa (42.3 percent), Central and Eastern Europe (39.2 percent), Latin America (37.7 percent), Canada (29.4 percent), Western Europe (26.1 percent), and Japan (15 percent).

IDC's cloud IT infrastructure forecast measures total spend (vendor recognized revenue plus channel revenue). Of the $57.2 billion in cloud IT infrastructure spend forecast for 2018, public cloud will account for 67 percent of the total, growing at an annual rate of 23.6 percent. Private cloud will grow at 16.7 percent year-over-year.

That said, worldwide spending on traditional 'non-cloud' IT infrastructure is expected to grow by just 4.2 percent in 2018 as enterprises continue to refresh their legacy platforms. Traditional IT infrastructure will account for 54 percent of total end user spending on IT infrastructure products -- that's down from 57.8 percent in 2017.

Outlook for Cloud Computing Growth

This represents a decelerating share loss as compared to the previous four years. Moreover, the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.

Long-term, IDC expects spending on cloud IT infrastructure to grow at a five-year compound annual growth rate (CAGR) of 10.5 percent -- reaching $77.7 billion in 2022, and accounting for 55.4 percent of total IT infrastructure spend.

Public cloud datacenters will account for 64.7 percent of this amount, growing at a 10.2 percent CAGR. Spending on private cloud infrastructure will grow at a CAGR of 11.1 percent.

Some analysts already believe that it doesn't matter who leads the cloud infrastructure market, since it's essentially a commodity business with rapidly shrinking profit margins. So, what does really matter? Which vendors are best positioned to champion and lead the 'Optimal Hybrid Cloud' environment?

Wednesday, June 27, 2018

Video Entertainment Industry Disruption is Unstoppable

Ongoing disruption of the video entertainment industry is most apparent in North America, where incumbent pay-TV service providers continue to report significant subscriber declines. Past attempts to slow or reverse the customer losses have proven to be unsuccessful. Clearly, it's a huge challenge.

Furthermore, relatively new rivals in the sector, such as AT&T and Verizon, have invested heavily to acquire legacy media and online advertising companies in the hope of finding a viable business model to compete with more innovative offerings from a growing list of alternative providers.

Video Entertainment Market Development

Meanwhile, the growth of subscription over-the-top (OTT) video services has been driving the changing trends in the pay-TV landscape. OTT video services have attracted hundreds of millions of subscribers worldwide, causing pressure on traditional pay-TV operators.

This OTT growth trend is expected to continue, reaching a subscriber base of 400 million in 2018, according to the latest global market study by ABI Research.

OTT video services offer less expensive alternatives and no long-term contract features compared to existing pay-TV offerings that are driving an increasing number of pay-TV customers to switch to these OTT services.

In markets such as North America and Europe, traditional pay-TV operators have jumped into the OTT market to improve subscriber churn by providing less costly video service. DirecTV’s Now, Dish Network’s Sling TV, and Sky’s Now TV are among the operators which offer Virtual Multichannel Video Programming Distributor (vMVPD) services, linear channels via an internet connection.

"vMVPD services offer live TV packages as low as $10 and customized packages are attracting cost-sensitive customers," said Khin Sandi Lynn, Industry analyst at ABI Research.

Dish Network’s Sling has secured more than 2 million subscribers in the two years since it launched. Similarly, DirecTV Now has gained 1.2 million subscribers within one year of its launch, offsetting the subscriber loss of its satellite TV platform.

"Pay-TV operators recognize the consumer demand for vMVPD services and are trying to expand their OTT offering by providing more content choice to compete against other subscription OTT services such as Netflix," Lynn noted.

Despite the low cost of basic vMVPD packages, the availability of live sports packages and customization features contribute the higher ARPU compared to other subscription OTT services. Hulu and YouTube launched live streaming packages in 2017 creating more competition in the vMVPD market.

Outlook for Legacy Pay-TV Market Recovery

"As competition intensifies, content and quality of service are crucial to win the OTT war," concludes Lynn. ABI Research forecasts that OTT video services will put more pressure on traditional pay-TV services especially in the developed markets with high broadband and pay-TV penetration. The worldwide OTT video market is expected to grow at CAGR 10 percent to generate $51.4 billion in 2022.

That being said, the duopoly of legacy telecom service providers and cable-TV companies will continue their quest to reinvent their business. While it's unclear if a strategy to acquire legacy media and online advertising firms is the answer to their dilemma, the prospect of being able to compete successfully against Netflix, Hulu or YouTube seems bleak by comparison.