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Cable Technology Feature Article

March 05, 2013

Telco IPTV Steals VOD Share from Cable, Satellite in 2012

By Tara Seals, TMCnet Contributor

Telcos that offer IPTV (News - Alert) are shaping up to be a formidable force in the United States if thier 2012 performance is any indication. According to research from NPD Group, telecom operators grew their share of the $1.3 billion video-on-demand (VOD) movie-rental market a respectable four percent last year, and earned twice the amount of movie-rental revenue per subscriber than cable.  

Even though more than three-quarters of all transactional video-on-demand (VOD) movies were rented via cable and satellite TV services last year, Verizon (News - Alert) FiOS and AT&T U-verse seem to have deeper engagement with their subscribers. NPD estimates that in 2012, U.S. telecoms earned average per-subscriber VOD-movie-rental revenue of $25.29, cable-TV operators garnered $13.83 per subscriber, and DirectTV and DISH Network netted an average of just $10.33.

Even so, by sheer dint of subscriber numbers, cable TV operators continued to control more than half (56 percent) of the overall transactional-VOD-movie market, followed by satellite-TV operators (27 percent), and then telecom operators (18 percent) in 2012. However, telcos grew their VOD-movie-rental share four percentage points during this time period, while cable operators’ share declined four percentage points, and satellite operators’ share increased just one percentage point.

“Verizon FiOS (News - Alert) and AT&T U-verse still considerably lag cable operators in the number of service subscribers; however they are actually growing their share of the MPVD VOD-movie-rental market,” said Russ Crupnick, senior vice president of industry analysis for NPD. “Telecom operators are leading their competitors when it comes to earning additional revenue from VOD movie rentals.”

The ability on the part of telcos to grow market share is notable considering the penetration rate for pay-TV in American homes and a shift in the perceived value of the service. TDG's Benchmarking the Connected Consumer survey of 2,000 US adult broadband users found that even though nearly nine-tenths of broadband subscribers take pay-TV services perceived value has declined in the last 12 months.

This time last year, 55 percent of pay-TV subscribers rated their service as a good . Now, that number is just 49 percent. Furthermore, the percentage of pay-TV subscribers rating the value of their service as extremely good has declined from 31 percent to 25 percent.

"With prices for traditional pay-TV services on the rise, it makes sense that consumers would second guess the value of these subscriptions," said Michael Greeson, founding partner of TDG.

"Though value has remained high for decades, in the last year perceptions seem to be waning. Without doubt this is due to continued economic uncertainty, but our research continues to show that the availability of alternative video sources is weighing more heavily on consumer perceptions than many believe."

Edited by Brooke Neuman

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