Cord nevers don't know what they're missing, and pay TV needs to show them, says Parks' Sappington

Parks Associates' Brett Sappington speaking Tuesday during the Pay TV Show in Denver. (Ben Munson/FierceCable)

DENVER—Brett Sappington, senior director of research at Parks Associates, kicked off the first annual Pay TV Show detailing some of the emerging challenges and opportunities for the pay TV space.

He broke out the virtual MVPD space by operators (DirecTV Now, Sling TV), content producers (Hulu and Philo), online brands (YouTubeTV), consumer electronics makers (Playstation Vue) and OTT services (FuboTV). But he also pointed to the growing number of premium channels, sports networks, cable channels and broadcasters that are increasingly going over the top. He said that cable channels and content companies are getting more involved because they realize they need have a bigger market.

Many of those companies are looking out at opportunities like vertical and horizontal integration. The U.S. industry right now is watching deals like AT&T and Time Warner play out in court; and Disney, 21st Century Fox, Sky and Hulu come together. Sappington said an interesting aspect of the Disney-Fox deal is that with one majority owner in Hulu, there isn’t a guarantee anymore that they’ll play nice with the other owners.

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Sappington also pointed to the growing acceptance of consumer self-aggregation, something the pay TV industry previously thought would be too much trouble for consumers. He said that the fastest growing segment in Parks’ U.S. OTT service survey is households that have three or more services. There are plenty to choose from as well, with Parks currently tracking 214 U.S. OTT services available in 2018.

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“Consumers are typically taking the first service they want and then churning through other services as they look for the right mix,” Sappington said.

Sappington also noted the new emphasis on OTT partnerships today, which can help provide access to promotion, distribution, broadband bundling, set-top box integration and zero-rating for data. Operators like Comcast are offering several different streaming services, and companies like VRV are serving as a video aggregation hub for more niche streaming services.

Of course, with the opportunities also come new challenges. Sappington called cord nevers, or people who have never had pay TV, a generational wave. He said the scary part is that they don’t know what they’re missing. Because of that, pay TV now has to change its marketing strategy because it falls to prove the value proposition.

“The question for pay TV is, how do you fit in in all of this?” Sappington asked.