Harvesting in the Linear Video Business
“Harvesting revenue” is a proven business strategy for declining markets. And it might turn out that linear video will prove to be among the most-successful examples of harvesting the communications industry ever has seen.
It will not be the first such example. Service providers long have harvested voice revenue, access line revenue, text messaging and legacy business service revenue. Over the next several years, a harvesting strategy will happen in linear video entertainment.
And, for some time, it might be possible to grow revenues on a shrinking customer base.
Research firm SNL Kagan recently predicted that the U.S. linear TV industry (consisting of cable, satellite and telco service providers will lose 10.8 million customers by 2021. Total linear TV subscribers will be around 82.3 million at that time, which will be 20 percent less than the peak.
But some analysts believe market share in linear and OTT video still will lie with today’s providers of linear video subscription services, not the pure-play over the top providers.
In some clear ways, it already is possible to argue that the era of linear video subscriptions has passed its peak, as seen in net shrinkage of accounts. Revenue growth is another matter, as, so far, aggregate revenues are still growing, on a shrinking subscriber base.
Overall annual spending on subscription video and TV services in the U.S. market will peak at $130.3B in 2019, with revenues starting to decline to $125.7B by 2022, Strategy Analytics predicts.
Annual revenue growth for emerging players will fall to 4.4 percent by 2022, which you might argue represents “success” for a product in a declining phase of its life cycle.
Still, today’s linear video leaders, such as Comcast and AT&T, still will account for more than 80 percent of total market revenues in 2022. In part, that is because average revenue per linear account is far higher ($100 a month) than for an OTT service ($10 a month).
After 2022, it is possible OTT will begin to grow share.