OTT TV Sector Poised for a Shakeout: Analyst

Market is ‘too big to fail, but too small to succeed,’ TDG’s Espelien says
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The new wave of over-the-top TV providers are adding subscribers but not at a rate that’s fast or big enough to sustain all of them, setting the market up for an inevitable shakeout, a top video and TV analyst said. The addressable market for those various OTT TV service providers is in the 10 to 20 million range — not enough to keep all of them fed, Joel Espelien, senior analyst with The Diffusion Group, said during a keynote presentation at The Pay TV Show in Denver.

Joel Expelien, senior analyst with The Diffusion Group, during a keynote at the Pay TV Show in Denver.

Joel Expelien, senior analyst with The Diffusion Group, during a keynote at the Pay TV Show in Denver.

According to TDG’s latest forecast, U.S. virtual multichannel video programming distributors will have 20.1 million subscribers by 2022 on the high-end model, 15.8 million for the mid-range estimate and 11.6 million in the low case scenario.

That market is “too big to fail, but too small to succeed,” Espelien said.

Today’s players, which include PlayStation Vue, Philo, YouTube TV, Hulu, Sling TV, DirecTV Now, fuboTV and Sling TV, have a combined 5 million to 6 million subscribers.

For a nascent sector, that’s “not bad,” Espelien said, but he stressed that there’s still not enough to share among a group of service providers — one expected to expand in the months ahead — to be sustained for the long haul.

And while the expected rate of growth for the OTT TV sector would be seemingly a healthy one for a lot of industries, it’s a bit different in the pay TV arena in part because there is an ARPU tradeoff even when traditional MVPDs replace lost subs with those coming in via an OTT-delivered offering.

“It’s not a one-for-one trade,” Espelien pointed out.

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