Inflection Point for Linear Video?

 Nobody knows yet whether an inflection point has been reached in the linear video subscription business, but it arguably has happened. If so, that means the rate of change will increase significantly, and result in faster rates of account decline.

It is not a new problem, at least in developed markets, where every legacy service has faced maturity and then decline.

“Everyone” expects streaming services to be the replacement product, with a couple significant potential implications. Average revenue per account or per user will tend to fall, as streaming services cost far less than linear video subscriptions.

The move to “skinny bundles” (smaller packages of channels that cost less) also is driving the lower ARPU.

Eventually, though, as linear subscriber numbers really start to fall, there will be a bifurcation of revenue. Today, linear video is a two-sided market, with distributors earning revenue both from advertisers and subscribers.

What already is developing in the streaming market are revenue models that rely only on subscription fees (Netflix) or advertising (Facebook, YouTube) or transactions (Amazon Prime).

What obviously happens is that the linear services will suffer on several fronts, losing subscription revenue; losing advertising revenue and losing profit margins.



source: UBS
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