Fallout from DTH collapse

The impending demise of DTH, occurring at different rates by region, has consequences both direct and indirect for other forms of video distribution. While boosting the rise of streaming the exodus is also showing up in rising IPTV subscriptions in some markets, while even propping up cable in a few.

The DTH collapse was not widely anticipated even a few years ago but has just been chronicled by the latest report from Rethink Technology Research’s Rethink TV service entitled, “Who benefits as Global DTH revenue set to shed $ billions? – Forecast to 2024”.  As the report notes, the decline began around 2010 with churn from the big US cable operators such as Comcast and Time Warner Cable (now part of Charter Communications) as firstly lower end subscribers switched to a combination of FTA and Netflix in many cases.

It was only a matter of time before the contagion would spread to the big US DTH operators, AT&T’s DirecTV and Dish Network as similar providers of bloated packages and it did, but then it accelerated for them on the back of a secondary factor, an incipient backlash against satellite. This has led to some operators outside North America such as Sky almost embracing the trend and acknowledging that this base will migrate to streaming over the next few years.

This was a cue for the Rethink report to construct what looks like a domino theory of collapse spreading from region to region, starting in the US, proceeding to Europe and then concluding in more developing regions. This makes sense because in some developing countries, including India and all those in Sub Saharan Africa, satellite’s advantage still holds today as the only medium guaranteeing wide reaching availability of premium content. In these countries it will only be later as fixed or more mobile infrastructure matures sufficiently that those benefits will fade away and then satellite will wither on the vine there too.

Meanwhile, as the Rethink TV report points out, even those Western operators that maintain their subscriber bases by moving them to streaming options will struggle to sustain revenues, because ARPUs will be lower. That reflects a key motive for churning being to avoid paying over the odds for packages that contain a lot of content given subscribers never watch. DTH operators themselves therefore have to compete on price with other providers of “skinny bundles” if they are to mop up their departing customers via the life rafts of low ARPU OTT.

This makes it impossible to maintain existing high ARPUs at historical levels, and there are signs of this already in the revenues of the big US DTH players. The wheels have come off particularly fast for AT&T in the US as DirecTV Now, its stand-alone OTT seen as an alternative to the main DTH service, is losing subs after initial gains and investors are starting to ask if this is a permanent trend.

The Rethink TV report points out that Latin America, although nominally a developing region, has more in common with the US than Asia. DTH there led rapid growth in pay TV over the period of 2008 to 2014 on the back of an expanding middle class in key markets, including the big two of Brazil and Mexico. The charge was led by DirecTV Latin America and Sky Brasil, now both folded into Vrio under AT&T’s ownership, along with America Movil’s Claro TV and Dish Mexico. Yet all of these now face a swing towards broadband delivery as infrastructures expand. Their DTH business is either shrinking now or will start to do so by 2021 at the latest.

The report also cites the unique and curious case of China, where there are almost 500 million FTA viewers of regional channels over satellite but virtually no pay DTH as this is impeded by regulatory constraints and government paranoia, so represents a black hole in any such forecast.

One beneficiary from the decline of DTH is IPTV, particularly in Europe and Asia Pacific. In the former cable will be largely flat over the next five years to 2024 while DTH subs will sink by around 5%, but IPTV will gain almost 15% in terms of homes. Streaming is hard to compare directly on a subs count because many pay TV homes have one or more OTT package in addition to those homes that are FTA plus OTT-only. By revenue though, streaming will be by far the biggest gainer set to more than double between 2018 and 2024 in Europe, while SVoD alone will be up closer to three times.

Even in Asia Pacific, where DTH will hold onto its mojo for longest, IPTV is the clear frontrunner of the legacy broadcast distribution options. One recent forecast from Digital TV Research has IPTV rising by 83 million subscribers between 2018 and 2024 to reach 272 million. While 40 million of the gains are forecast for China where DTH does not figure, 28 million are assigned to India where DTH is dominant today. Rethink TV forecasts total Asia Pacific DTH homes to rise from 98.7 million in 2018 to 113.8 million in 2024, much smaller than the likely IPTV gains. In many of these APAC countries where DTH will continue to expand for a few years more, the IPTV gains will come from a combination of a rising middle class and switch from cable.