What is Pay TV?
Pay TV is a content distribution model where viewers pay a subscription to access video content from a traditional multichannel television service. Pay TV requires proprietary equipment and video content is presented in a linear format. Traditional cable and satellite television services are both examples of subscription-based Pay TV.
Pay TV continues to out-earn competing content distribution models but the ongoing proliferation of over-the-top (OTT) video on demand services and streaming platforms has led to a steady decline in Pay TV viewership.
What’s the Difference Between Pay TV, Broadcast TV, and OTT TV?
Pay TV, Broadcast TV, and OTT TV are all business models that allow viewers to access television content. While over-the-air (OTA) broadcast TV signals can be accessed for free simply by using an antenna, Pay TV signals are encrypted and require a proprietary coaxial cable or satellite dish network set-top box to translate the signal in order to prevent theft of services. In contrast, OTT TV is delivered to viewers over the public internet.
Pay TV service providers deliver content in a linear TV format, according to a schedule of television programming and advertisements determined by the broadcaster. Rather than choose their own programming on-demand, as with many types of OTT video distribution, Pay TV subscribers must tune in to TV channels at a specific time to view desired content, including both live TV events and pre-recorded programming.
Pay TV can also include pay-per-view premium content. Like subscription-based Pay TV services, viewers must pay to have pay-per-view content decrypted for viewing, but pay-per-view differs in that it’s usually a one-time payment for a single viewing.
The Most Popular Pay TV Services Around the World
The Top Pay TV Services in America
In the United States, the largest Pay TV services include traditional cable companies such as Comcast (Xfinity), Charter (Spectrum), and Cox Enterprises, telecommunications companies such as Verizon and AT&T (DirecTV), and satellite television broadcasters such as Dish Network.
The Top Pay TV Services in Europe
In the United Kingdom and Italy, Comcast-owned Sky was the top Pay TV company in 2021. Also popular in Germany, Sky serves more than 20 million subscribers in six European countries and continues to expand its reach. Other major European Pay TV service providers include Vodafone, which is popular in both Germany and Spain, and Telia, which is popular in Norway.
The Top Pay TV Services in Australia
In Australia, the largest Pay TV service providers include Foxtel, Optus Television and TransACT, all of which provide cable TV services in some cities. Foxtel provides satellite service for areas where cable is not available.
The Origin and History of Pay TV
In the United States, the earliest origins of Pay TV began with television systems of the 1950s and 1960s designed to reach mountainous or remote areas where free over-the-air television signals had poor reception. In addition, early TV providers made small efforts to add extra channels to free-to-air signals. In 1972, Home Box Office (HBO) launched as the nation’s first modern Pay TV network and first ad-free national cable TV channel, followed by Showtime in 1976. The creation of these ventures paved the way for explosive growth of Pay TV providers in the coming decades until streaming providers emerged in the 2000s.
The Streaming Battle: Pay TV vs. OTT
By the 2010s, OTT subscription video on demand (SVOD) services distributed via the internet evolved into major competitors to traditional pay television, with services such as Netflix, Hulu, Amazon Prime, and AppleTV gaining prominence. Competition among Pay TV and OTT providers as well as the increasing availability of public Wi-Fi and broadband internet has resulted in a wider range of user choices and a transformation in how users can access content.
Customers Are “Cord-Cutting” and Leaving Pay TV
Unlike pay television services, OTT content delivery allows viewers to watch content in a more mobile and on-demand manner. As a result, millions of Americans are “cutting the cord” which means they are canceling their subscriptions to traditional Pay TV in favor of OTT content that can be streamed whenever, wherever, and however.
Traditional pay TV will decline to 76.7 million households by 2024, the lowest penetration in a decade and a 27% drop from 2014, according to a recent report from the research firm Parks Associates.
Pay TV Companies Build or Acquire OTT Platforms to Compete
The shift towards OTT has resulted in increasing competition between legacy Pay TV providers and streaming video providers. To stay competitive, Pay TV providers are focusing on customer retention, experimenting with new business models, and launching their own video streaming services to make up for the revenue they’re losing.
For example, Hulu, a hybrid SVOD/Advertising Video On Demand (AVOD) service, began as a joint venture between Comcast (owner of NBC network) and Fox Corporation (owner of Fox network), and is now majority owned by Disney (owner of ABC network). Dish Network operates Sling TV, a virtual Multichannel Video Programming Distributor (vMVPD), and Fox also owns Tubi TV, a Free Ad-Supported Television (FAST) service. HBO launched HBO Max, Paramount (owner of CBS network) launched Paramount+, and Comcast also developed Peacock to appeal to cord-cutters. Initially, many new streaming services did not carry all four major TV networks. Today, vMVPD services like Hulu + Live TV and YouTube TV offer all of the major networks and have become leaders in the streaming video market.
With the OTT space growing so rapidly, competition is only set to increase. Still, with millions of subscribers, Pay TV will continue to exist as a profitable business model into the foreseeable future. In 2021, traditional Pay TV services in the United States earned $69.9 billion through advertising and another $85 billion from subscription revenue. Some traditional Pay TV programming, such as live TV shows and sporting events (professional sports leagues like the NFL and MLB have established partnerships and agreements with linear TV broadcasters worth billions of dollars) are likely to stick around on subscription-based Pay TV.
Manage Pay TV Content Distribution With Revedia Linear
This increased competition in the media and entertainment landscape means content owners licensing their assets for Pay TV distribution face new challenges. Ever-shifting consumer trends, complex licensing agreements, and poor distributor visibility have made it difficult for content owners who rely on legacy systems (often with time-consuming, error-prone manual processes and disjointed workflows) to effectively track and analyze data that can be used to optimize linear media revenue.
The Revedia Linear platform from SymphonyAI Media is a SaaS solution that helps content owners streamline and automate the process of effective revenue management for linear distribution. Content owners licensing to Pay TV providers can securely manage agreements, carry out automated royalty calculations, track distributor compliance, and ultimately optimize revenue performance. Contact us to request a demo.
