Tuesday, May 1, 2018

Product Lifecycles Explain Telco IoT, Content Moves

LIke any other product, consumer video entertainment subscriptions have a life cycle, and linear video subscription business now is past its peak, and is beginning a long decline. That process of product maturation now is a well-established trend in the communications business.

Prior products such as fixed network voice, long distance voice and mobile messaging also reached peaks. Fixed network voice subscriptions in the U.S. market peaked around the turn of the century. Long distance voice revenue, which had been declining for decades, likely reached a peak about the same time.

Mobile messaging also is being displaced by over-the-top messaging alternatives. In some markets, mobile revenue peaked in the second decade of this century. U.S. fixed network switched access lines peaked about the same time.  

You can see the impact in many ways, including industry employment. Use of long distance services peaked in 2000, according to the U.S. Federal Communications Commission.

U.S. streaming provider revenue (Netflix and others) grew 41 percent in 2017 to $11.9 billion. Revenue is forecast to reach $16.6 billion for 2018 and $27.6 billion for 2020, according to Convergence Research Group.  

In 2017 U.S. linear subscription revenue grew one percent to $107.6 billion ($94.30 per month average revenue per unit (ARPU). Revenue is forecast to decline slightly to $107.4 billion ($97.90 per month ARPU) in 2018.

We forecast US OTT subscriber households will far surpass TV subscribers in 2020, however US TV subscriber ARPU will be 4 times US OTT subscriber household ARPU down from 6 times in 2017.

Convergence Research estimates linear subscriptions are declining about four percent a year.

Such product lifecycles occur in all industries, and illustrate the reasons why firms such as Comcast, AT&T and Verizon have built, and are trying to increase, the amount of revenue earned from sources beyond connectivity (internet access, voice, messaging).

The same process of broadening revenue sources will happen in the 5G era, as revenue sources will be sought in platform, apps and other non-access areas.

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