David H. Deans'  Instablog

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.

Informa Telecoms & Media recently revealed the top ten anticipated trends during 2011 -- for the telecoms and media sectors -- at its annual Industry Outlook event in London, England.

"We have identified the key trends across our research areas that we think will shape the converging global telecoms and media markets over the next 12 months. In addition, our annual industry survey gave us some insight into how the industry feels about the issues most likely to dominate the landscape in 2011," says Mark Newman, Chief Research Officer.

1. Operators choose a smartphone platform strategy
The popularity of smartphone devices has led mobile operators, developers and handset manufacturers alike to re-focus on this device. Operators are trying to decide whether to build their own platforms or accept that the Internet and OS players will dominate. The outcome of this decision will determine who are the winners and losers.

2. Democratization of mobile smartphones
In 2010, smartphone adoption in the lower price tiers grew data revenues from a broader user base -- this trend will accelerate in 2011. Some vendors will further reduce the cost of smartphones, to create devices for the mass-market -- a strategy that is welcomed by the mobile operators. Informa expects 342 million smartphones to be sold worldwide in 2011 -- equating to 27 percent of total handsets sold.

3. Strategic partnerships between operators and Internet players
The successful mobile operators will be those that have strategic partnerships with key Internet players, and not the ones who want to block these companies from accessing their customers. While operators look to develop these relationships, they too are being forced to partner with each other.

4. Operators to focus on vertical markets
Operators have considered the mobile enterprise opportunity for many years. In 2011, their focus is machine-to-machine (M2M) rather than voice and SMS. The healthcare sector is where they're still in the early stages of learning the best opportunities. They will need to do the same for each vertical sector, to decide where to develop applications.

5. Web 2.0 will provide opportunities for growth
Mobile operators must harness IM and social networking to increase the use of their traditional messaging services, and to generate additional revenues. Mobile operators will need to maintain a primary role in how their subscribers access IM and social apps. This means implementing network-based address book services -- which will be the starting point.

6. Operators must catch up in the superfast broadband race
So far, leaders of superfast broadband have been the cable operators -- telecoms operators must move in 2011. Those with fiber need to be assertive -- to convince consumers and service providers to adopt their new networks. Low prices and attractive bundles, rather than speeds, will be vital. Operators will likely also rekindle their interest in low-cost VDSL.

7. The battle for the connected home continues
Connected TVs will overtake games consoles as the dominant in-home device, at least in terms of units sold. It's unclear how many people will use the online video services. By the end of 2011, Informa believes that we'll know whether over-the top services are game-changers for the pay-TV industry.

8. Cable TV declines in Western Europe
Operators struggle to convert European cable homes from analog to digital, and they're competing to upsell their subscribers to service bundles -- triple-play or quad-play. Informa predicts that the number of Western European cable TV subscribers will fall from 51 million in 2006 to 48 million in 2015 -- or from 31 percent of households to 26 percent.

9. LTE spectrum fragmentation will undermine its global potential
LTE's adaptability may undermine its global potential. The failure to identify globally harmonized spectrum for next-generation 4G services means that LTE is being required to provide operators with multiple options -- in terms of channel size and spectrum band, as well as a choice between FDD and TDD modes.

10. Network rationalization continues
2010 was a year of network rationalization -- 2011 looks to be no different. When it's unsustainable for small carriers to deploy new networks, market consolidation will follow, and so too will network rationalization. Informa expects more network sharing -- as carriers come under increasing pressure to universalize their networks and reach the underserved.

More...

My big take-away from the South-by-Southwest (SXSW) Interactive festival this year was a further validation that big media companies -- traditional publishers of print content in particular -- are still searching for a way to halt their collective slide into eventual insolvency.

Surely, given their vast resources, the very best big publishers are capable of evolving their business model. At least, that's their hope for the future. But, how does an innovation-challenged organization avoid extinction when unrelenting disruption of the prior status-quo continues to erode their once dominant market position?

As I attended the various panels related to this topic, I was reminded of the book "Inside Project Red Stripe" by Andrew Carey -- the story of how six of The Economist's cleverest people tried to create the "next big thing" online and essentially failed, after investing six months in idea exploration.

Hope in the Trust Economy
Big media companies seem to now be clinging to the belief that their fate is somewhat contingent upon the perceived value of an established reputation -- as an example; they're a trusted-source of quality content that you won't find anywhere else.

The rationale goes something like this -- as long as they can perpetuate the facade of their unique trustworthiness, then they still have a fighting chance of competitive survival in the 21st Century.

That said, when looking for a viable solution to their many problems, self reflection on past strategic blunders doesn't appear to be under serious consideration. A case in point: the industry insiders still maintain (in denial) that their worsening situation is the fault of others, not theirs.

Craig's List is to blame for the loss of classified advertising revenue. Google is to blame for aggregating newspaper content, grouping it with non-traditional publishers and thereby confusing readers. Bloggers are to blame for producing good-enough quality content, combined with low-price advertising rates. The list of excuses goes on and on.

Competing with Amateurs isn't Easy
In the panel entitled "Media Armageddon: What Happens when The New York Times Dies?" we heard a New York Times employee lament how "professional" reporters are totally frustrated at being scooped by more agile bloggers who tend to publish the story long before the journalist is ready. Others on the panel made consoling comments about the unfair advantages of amateurs.

Ironically, the New York Times has had to deal with several setbacks that eroded trust in the organization's editorial staff -- one of the most recent being accusations of plagiarizing content.

In the panel entitled "Crowd Control: Changing the Face of Media, or Hype" an employee at CNN insisted that investigative reporting was alive and well at big media companies, even after the perpetual newsroom staff cuts. Others on the panel shared their thoughts about how complete and accurate new event coverage typically came only from the established news networks.

Yet, CNN was happy to report (after fact-checking?) on the existence of weapons of mass destruction, when there weren't any found in Iraq. Meanwhile, they neglected to report on Iraqi civilian casualties as a result of the many U.S. air raids during the initial invasion and occupation of Iraq.

Is that why some people say they now watch The Daily Show with Jon Stewart on Comedy Central for the most unfiltered news from around the world? Has news parody become the only remaining path to truth-in-reporting on network TV?

Earned Media in the Free Market
My favorite commentary at SXSW was the notion that perhaps the average American consumer is too stupid to know what quality research and news reporting looks like -- therefore, more people now read independent blogs.

Yes, that's right, it's the customer's fault -- they are to blame as well.

In reality, there's a growing free-market for trust in 2010 and there's also enough thinking people in America to sustain this market transition for a very long time -- if that's what it takes.

Thoughtful trust must be earned -- it's no longer implied by a mere legacy brand. You can't easily regain misplaced trust, it's worthless when you try to buy it, it's pointless to try and fake it. Those who truly are worthy of people's trust will have to compete with a multitude of others who have already proven to be equally or more deserving.

This, I believe, is a sign of much needed progress.

Update: most brands are inherently overvalued by their creators, when moving into a market adjacency scenario. Here's a case in point. Western Union thought they would be a major player in the e-mail services market, based on their legacy brand -- as a trusted provider of telex and cablegrams. However, they failed to fully understand the new medium, and they eventually shuttered their email business after a few years of deep financial loses.

Disclosure: No positions