IPTV is being added to lower priced bundles by digital TV providers to lure in a younger generation of subscribers and give the market a needed boost after years of declining subscriptions.
The North American pay TV market is highly saturated, and growth for individual service providers typically comes from churn rather than large numbers of new subscribers.
That led to a decline in pay TV subscriptions from 2009 to 2013. But, according to one analysis, boosts in network speed and bundling options that include Internet Protocol TV (IPTV) is leading market growth for the first time in a long time.
Last year, the pay TV market saw a 0.58% loss subscribers; this year, the market's expected to grow 0.14%, according to market research firm Strategy Analytics.
Pay TV providers will experience modest gains through 2019 (source: Strategy Analytics).
North American Digital Television (DTV) subscriptions are expected to grow from 128.5 million households in 2013 to 142.6 million by 2019, implying a six-year compound annual growth rate (CAGR) of 1.8%, according to the Digital TV Forecast by Strategy Analytics.
IPTV will be the bright spot of the Pay TV market in the US, according to the research firm. In 2013, IPTV subscriptions grew by 17.5% year-on-year and that trend will continue with CAGR of 8.3% through 2019.
"When we talk about IPTV we're talking about streaming linear TV through Telcos providers like Verizon FiOS and AT&T U-Verse," said Eric Smith, a Strategy Analytics analyst and author of the Digital TV Forecast. "IPTV is combined with faster broadband over fiber optics by AT&T and Verizon, who are offering better bundling options that drives down the price compared with other cable and satellite provider competitors."
For example, Verizon and AT&T are offering "quad play" packages that bundle in mobile connectivity with previous "triple play" plans that included landline telephone, TV and Internet service.
IPTV services are attracting customers on price, speed, and bundling options (Source: Strategy Analysis).
"Comcast has become a technology leader with its Xfinity X1 and X2 platforms as well as the RDK," Jason Blackwell, a Strategy Analytics director, said in a statement. "This is driving a global trend where operators with advanced gateways and services have seen subscriber growth, better customer retention, and higher average revenues per user."
It's analogous to insurance companies that offer reduced pricing as more services are added, such as bundling home and auto plans.
"We expect to see these customers return to Pay TV gradually, albeit with different packages or different services than those they left, and IPTV services in particular stand to gain the most," Smith said.
In contrast to the Strategy Analytics forecast, Eric Brannon, a senior analyst with research firm IHS, said he expects pay TV subscriptions to decline "nominally" through 2018 - from 100.8 million today to 100.3 million in 2018. That's because the market is saturated by an older generation of homeowners, where IPTV provided by Telcos is being adopted by those under 30 years of age.
Brannon believes Strategy Analysis is seeing an uptick because several digital TV providers have had a banner year, but that's not necessarily indicative of a long-term trend.
"I believe it's the fact that cable providers have woken up to fact that two-year buy-in contracts are a significant deterrent for people. When service levels are comparable between IPTV and cable -- and cost is relatively comparative... really IPTV is going to win every time. It's the new kid on the block," Brannon said.
Brannon said IHS Q4 2013 figures had the pay TV market losing about 500,000 subscribers last year.
One trend Brannon doesn't see going away is the bait and switch strategy of many pay TV services.
While they've become very aggressive in bundling services, reducing pricing and even eliminating two-year contracts, prices may go up while no one is looking.
"Cable operators allow you to come onto their service and hop off as you see fit," Brannon said. "Their dirty little secret is to raise rates over time. Their ultimate angle is they hope you'll be hopping on long enough to forget you're on promotional pricing and you won't check your bill over time when the price goes back up."
Lucas Mearian covers consumer data storage, consumerization of IT, mobile device management, renewable energy, telematics/car tech and entertainment tech for Computerworld. Follow Lucas on Twitter at @lucasmearian or subscribe to Lucas's RSS feed. His e-mail address is email@example.com.
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This story, "Streaming services may rescue the Pay TV market" was originally published by Computerworld.