With demand for video services on the rise, it's a good time to be in the pay-TV business, according to figures from ABI Research. The total global pay-TV market raked in $58 billion at the end of Q2 2010, almost a 10% increase year on year, driven by higher priced programming packages and advanced services like high-definition programming.
Cable TV still accounts for the majority of the money - albeit a slim majority at 52% - but it's also the slowest growing segment. Satellite TV and IPTV account for the rest (in that order), and the IPTV sector is growing in terms of both ARPU and aggregate service revenue. ABI expects that to keep growing at a CAGR approaching 20% to over $40 billion by the end of 2015.
But while the market is growing, it's also changing. Consumer TV viewing patterns are shifting drastically - not to the point of killing the traditional linear broadcast TV model, but enough to give linear broadcast extra competition from non-linear video services, particularly internet-based video (see "How we watch TV in 2010").
So-called over-the-top (OTT) video has loomed on the IPTV horizon arguably since YouTube became a household name. But while web TV efforts from the likes of Microsoft and Apple - as well as pure IP video content plays like Hulu and Joost - have threatened for some time to compete against IPTV players by offering free direct-to-consumer video over the same broadband pipes, such services haven't made a noticeable impact on the pay-TV sector.
That might change, however, with recent and more aggressive OTT-video initiatives from big-name web players leveraging the business model established by application storefronts and home-gateway devices that make living-room access to OTT video easier than ever. The good news is that the impact could actually work in favor of IPTV players that are savvy enough to cash in rather than resist the OTT wave.
Search-engine giant Google is pushing for OTT video on two fronts. One is its upcoming Google TV platform, which is slated to launch in the US later this year and worldwide in 2011.
In a keynote speech at the IFA technology trade fair, CEO Eric Schmidt said Google is working with content providers to populate the Google TV service with video and other entertainment content. Users will also be able to access online content and live TV listings via a search bar on the top of television screens, according to a WSJ.com report.
Under the plan first announced in May, Google TV will be incorporated into Sony televisions and can also be added to existing televisions through the Buddy Box set-top box. Meanwhile, Samsung has said it is considering using Google's Android OS to build web-TV devices (although it is also working on an OS that can be used for both phones and TVs).