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Remaining Upside Opportunities for Pay-TV Services

The legacy pay-TV services market can now be divided into two distinct groups. First, those regions where the market is fully saturated and customer churn is the primary activity. Second, the developing nations where local pay-TV providers can still find new customers willing and able to pay for their offerings.

According to the latest market study by ABI Research, the global pay-TV market added nearly 47 million new customers in 2012 -- reaching a total of 864 million subscribers.

"The growth in satellite, cable, and IPTV markets was strong, although digital terrestrial TV growth was flat in 2012. We expect that the pay-TV market will continue to grow in 2013 to reach 907 million subscribers," said Jake Saunders, VP and practice director at ABI Research.

The worldwide IPTV subscriber base has been increasing over the past few years. In 2013, the global IPTV subscriber base is expected to add over 9 million subscribers to reach 79.3 million.

More than half of the net addition of new subscribers will be from the Asia-Pacific region -- China alone is expected to add more than 3 million pay-TV subscribers.

The cable TV market will remain strong, especially due to the growth in Asian and Pacific markets, such as China and India. Across the globe, cable TV will maintain the largest market share of the overall pay-TV market in 2013.

However, the continued growth of lower cost IPTV service offerings will cause the cable TV market share to decline to 65.4 percent in 2013 from 66.2 percent in 2012.

So, where are the remaining untapped upside opportunities?

At present, only 33 percent of worldwide pay-TV subscribers are using High Definition (HD) TV services. HDTV penetration is the highest in North America (84 percent), followed by Western Europe (76 percent) -- these are the saturated markets.

HD adoption is one area of upside growth potential for the legacy pay-TV sector. The addition of an attractively priced OTT-like video-on-demand (VOD) steaming service is another potential opportunity.

As many of the countries in different regions are trying to switch over to digital TV transmission, the number of HD channels and packages offered by the pay-TV operators will likely increase.

Worldwide HD service adoption is expected to grow at a slow but consistent pace. ABI has forecast that 38 percent of global pay-TV subscribers will be using some HDTV services in 2013.

I believe that the big unknown is the ongoing introduction of video streaming services into the saturated pay-TV markets. Will the incumbent pay-TV service providers move more aggressively into this space, or will they continue to move cautiously?

The fear of revenue cannibalization will immobilize some service providers from expanding beyond their traditional offerings, while others will boldly seek a solution to those challenges and embrace the apparent trend towards IP-based fully on-demand multi-screen video entertainment.

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