Pay-TV providers face a perfect storm of slowing growth, intensifying competition and business model disruption. This according to the 2017 Pay-TV Innovation Forum, published by Nagra, a provider of content protection and multiscreen television solutions, in partnership with MTM, an international research and strategy consultancy.

This global research programme examines the state of innovation in the pay-TV market and provides perspectives on the most attractive areas of opportunity for both service providers and content owners in Europe, Asia Pacific, Latin America and North America.

The 2017 programme highlights that the pay-TV industry is in a period of unprecedented global change. An estimated 82% of executives agree that competition in the pay-TV industry is set to increase over the next five years, and around 71% believe that service providers will struggle to grow their businesses during the same period.

The research also identifies three key disruptive challenges facing the industry worldwide: the proliferation of cheaper OTT services, changing consumer behaviour and demand, and the rise of content piracy, noting for example that 67% of executives agree that competition from subscription VOD services will have a negative impact on pay-TV, pushing down prices and increasing churn, and 66% agree that we will see a new wave of mobile-first services to cater to evolving consumer viewing habits.

Specifically on piracy, the research found that 50% of executives believe content piracy will lead to greater pressures on the industry over the next five years (up from 41% in 2016) with online streaming, peer-to-peer downloads and IPTV piracy cited as the most important forms of piracy affecting service providers and content owners today. The research goes further to examine actual revenue lost to pay-TV piracy, estimating that service providers could stand to gain $7 billion in unrealised pay-TV revenue annually, if at least one in four consumers of pirated pay-TV services would switch to a legitimate option. Additionally, 72% of pay-TV providers see the benefits of engaging in anti-piracy activities, combining technology, legal and enforcement action and consumer education, to bring tangible positive results.

While this outlook remains challenging, the research highlights a strong consensus amongst executives that innovation is becoming more and more important in the industry: the majority of executives (85%) agree that in order to grow, pay-TV service providers will have to innovate strongly over the next five years (up from 78% in 2016), with 74% considering innovation to be a top strategic priority. Pay-TV executives are increasingly focused on delivering standalone OTT services (64% of respondents believe it to be a commercially attractive area opportunity), multiscreen TV Everywhere (67%), app-based TV services (61%) and advanced functionality (53 %) such as voice and 4K, alongside innovative content propositions (74%) and new pricing and packaging models (78%.)

More advanced service providers are also increasingly investing in adjacent areas such as advanced advertising and data solutions (50%), Internet of Things and Smart Home solutions (42%), and new content and technology services (45%), such as licensing or white-labelling in-house technical solutions.

Commenting on the study, Simon Trudelle, Senior Director, Product Marketing, Nagra, said: “It brings to light new trends, and in particular the rise of content piracy which emerges as a growing concern. Overall, it is clear that the industry recognises the changing nature of TV and the need to adapt quickly to this fast-changing environment.”

“This research shows that while external pressures are intensifying, the pay-TV industry still has a strong competitive edge in delivering video entertainment services,” said Jon Watts, Managing Partner at MTM.