With early entries such as Dish Network’s Sling TV closing in on 1 million users, and the highly anticipated launch of DirecTV now still to come, analysts for financial company UBS predict Internet-based pay-TV services will have 15 million subscribing U.S. homes by 2020.
“While YouTube and Netflix have been disrupting the TV ecosystem for a decade, we expect Internet-based pay TV services to more dramatically upend business models by offering the same content at a lower price while transforming the user experience,” said the report, top-lined by UBS analyst Doug Mitchelson.
The analyst believes that Sling TV, along with another so called virtual MVPD (or “V-MVPD”), Sony PlayStation Vue, have grown to 1 million subscribers, based on what is “little marketing.”
Surveying 2,000 consumers, UBS found that 37 percent of pay-TV homes said they would consider a V-MVPD service. The number was 56 percent for Netflix households and 76 percent for likely cord-cutters.
“Leveraging our survey, demographic trends and technology adoption curves, we see the potential for 15M V-MVPD homes by 2020,” UBS said. “Limiting factors likely to influence growth, particularly initially, include quality of video streaming, consumer awareness, and whether the V-MVPD business model will prove attractive.”
The migration to these new IP-based platforms will impact the renewed momentum in video subscriber growth that cable companies are experiencing, the report added. But cable will still fare better than the competition.
“Increased competition suggests renewed traditional video subscriber losses at Comcast and Charter by 2018,” UBS said. That said we believe cable subs will hold up better than satellite or telco subs given broadband bundling and potential as fast followers. Resulting national video reach, increased broadband reliance and mobile video consumption adoption will eventually lead cable into the wireless market. For media, we believe V-MVPD will moderate cord cutting, but increase cord-shaving—not every company will be included in every V-MVPD bundle.”
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