Pay TV operators must embrace OTT video by rolling out updated set-top boxes as the market slows down, according to new research.
The Pay TV market has been struggling with increasing customer churn and maintaining ARPU, and is forecast for only 3.7 percent CAGR through 2020, ABI Research said.
In contrast, OTT video should see around 26 percent total revenue growth this year, with 24 percent CAGR through 2019.
The research firm said customers are starting to demand a similar experience from their Pay TV subscriptions as they get from OTT services, such as Netflix and HBO Go.
It cited features such as content search, recommendations and mobile device support in particular.
As such, Pay TV operators need to deploy IP-capable hardware to deliver such services.
Last month, France’s Free unveiled a new triple-play offer featuring a 4K-ready STB that runs Android TV.
ABI warned operators that are “passive” in embracing OTT face the challenge of maintaining subscriber counts even within their dedicated and satisfied customer base, while contending with other subscribers leaving in favour of more “progressive” options.
Analyst Eric Abbruzzese said: “Comparatively high priced pay TV bundles are losing customers to more inexpensive, IP-delivered content.
“Operators that are first to market with new set-top box technologies can expect strong returns—as much as 10 percent higher ARPU than with legacy technology—while those introducing the technology later will struggle to see similar success.
“Pay TV will continue to hold market majority going forward [but] the best chance for positive growth in the pay TV space lies in the implementation of OTT capability in both standalone and IP-enabled STB capacities.”