The modern TV industry has been built around one of the most powerful commercial partnerships created. The TV operators have bundled multiple channels into subscription packages, yielding high margins both for themselves and the channels. In addition, TV channels have also been able to generate additional revenues from advertising and web properties, creating a very profitable multi-billion dollar industry.
A couple of years ago, the threat to this model was the risk of someone replacing their main TV subscription with a Netflix-type SVOD service, effectively replacing one distribution and bundling strategy with another. My personal opinion is that this view of the trend is too one sided. Instead, the real change is in the mindset of the consumer. They no longer expect a one stop shop for all their video consumption and once the consumer starts to realize that there is a huge market of attractive video services which they can pick and choose from they will increasingly start to do so.
My expectation is that the total spend per consumer on video services will continue to rise at a stable, but slow rate, and that this spend will be spread out over many different services. The loser will clearly be the TV operator, who will have to counter declining ARPU levels with additional packages to reach new consumers. While the current business models are so powerful that the industry will take at least 10 years to make a significant transition to a fully transformed market, we are starting to see the impact already now. In markets where pay TV penetration is stable and mature, this shift will be faster, and in emerging markets we still see the traditional bundle models of the TV operators be attractive for many years to come.