Canada's Pay-TV Market Set to Peak this YearWednesday, September 5th, 2012
Canada’s pay-TV market is expected to reach the saturation point this year, compelling the country’s cable, satellite and IPTV operators to seek new growth opportunities, according to an IHS Screen Digest Television Intelligence Monitor Market Report from information and analytics provider IHS (NYSE: IHS).
After years of steady expansion, penetration of pay-TV subscriptions among Canadian television households is set to reach an all-time high of 92 percent in 2012, as presented in the figure below. Subscription penetration will decline just slightly during the following years, due to economic issues and rising competition from over-the-top (OTT) services.
“The inevitable maturation of Canada’s pay-TV industry has finally arrived,” said Erik Brannon, analyst for television research at IHS. “The country’s pay-TV operators are feeling the impact of economic woes spurred by the recession that recently ended in the United States. Furthermore, OTT players like Netflix are playing a role in the cessation of pay-TV subscriber growth.”
The Canadian peak in pay-TV subscriptions comes three years after the same event occurred in the United States. Canada reached the peak later due to delayed economic effects and severe data caps implemented by cable operators in the country.
With the era of significant growth for the basic video segment coming to an end, Canadian cable operators are seeking ancillary businesses to bolster sagging subscriptions.
For Canada’s cable operators, new growth opportunities lie in services like Wi-Fi and cellular.
Cable in a Bind
Cable continues to dominate the pay-TV business, but has been suffering declines in basic video subscriptions since 2011. The cable operators have been losing share to upstart IPTV players, such as Telus and Bell Canada. Telus and Bell’s Fibe TV are increasing their subscribers at a breakneck pace, even at the expense of satellite.
Satellite Doesn’t Crash to Earth
On the satellite front, operators will continue to leverage their rural dominance. Satellite companies also have added IP video on demand (VoD) offerings to customers with existing high-speed data (HSD) connections, although effectiveness can be marginalized due to some customers buying HSD from cable operators. Shaw is continuing to bolster its satellite fleet with an upcoming satellite launch to add HD channel capacity.
Declines at Bell Satellite TV are to be expected, as the company transitions existing customers to its Fibe TV service. For Shaw Direct, however, its first recent quarterly decline comes as a surprise, especially since the company has not posted any declines since two consecutive quarters of decreases in the third and fourth quarters of 2004. Overall, mixed quarterly results are to be expected, with satellite as a category expected to grow subscribers slowly through 2016.
IPTV Plays to its Strengths
IPTV players are in the best position in Canada’s pay-TV market with several weapons in their arsenal, including capabilities to offer aggressive promotions, roll out fiber-to-the-home (FTTH) connections and expand the penetration of homes passed.
OTT not All it’s Cracked Up to Be
Despite the challenge posed by Netflix, IHS believes that Canadian pay-TV operators are better-positioned to fend off the threat from such OTT services. The majority of cable operators provide severe data caps that are easily reached with significant OTT video consumption.
By 2016, IHS expects Canadian pay-TV subscriptions to decline only slightly to 89.9 percent of TV households.