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Pay-TV Growth Slows as OTT Video Rises

Pay-TV subscribers are expected to grow by 8 percent in 2009 to reach nearly 733 million worldwide despite the challenging economic environment, according to the first quarter market update from Pyramid Research.

Considering the current estimates of a 6 percent decline in global nominal GDP during 2009, the adoption levels for pay-TV services will undoubtedly hit a speed bump worldwide, with year-over-year growth rate declining to 8 percent from 11 percent in 2008, notes Ozgur Aytar, research manager at Pyramid Research.

Lower double-digit growth rates expected across the emerging regions coupled with the stabilizing effect of multi-play bundles and their increasing penetration particularly in mature pay-TV markets should, however, prevent the global subscriber base to take a nose dive.

"We started the year with a great sense of uncertainty of the impact of the economic downturn on the pay-TV market, and while much uncertainty remains, pay-TV operator's first-quarter results published to date have not been so bad after all. Most continue to add subscribers, and those that are losing customers are doing so largely as a result of the entry of new competitors," says Aytar.

The more significant impact of the recession will be felt in customer spending on pay-TV services in 2009, as operators have increasingly been rolling out lower economy pay-TV and multi-play bundle fees to respond to mounting customer demand for less expensive services and to retain subscribers.

By Pyramid estimates, average expenditure per pay-TV household will decrease by 6 percent in 2009 worldwide and by as much as 20 percent in some of the emerging markets.

Cable TV operators are expected to generate more than half of the global pay-TV revenue in 2009. The prospects for IPTV platforms appear to be most promising across the Western European markets, where IPTV subscribers are projected to account for 15 percent of total pay-TV base by year-end.

Elsewhere, IPTV's share of subscribers will remain less than 5 percent of the total market. The slowdown in the global economy has hit both capex and the speed of broadband network deployments in emerging markets. Over the top (OTT) video adoption is yet another factor.

In order to manage through the downturn, operators are scaling back their capex by as much as 20 to 30 percent, and most are holding back on expansion plans but rather focusing on increasing operational leverage in existing markets, which in return is negatively affecting the availability of IPTV services.

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