VICTORIA, B.C. — In its latest Couch Potato reports, the Convergence Research Group estimates Canadian OTT service access revenue grew substantially in 2019, while cable, telco and satellite TV access declined last year.
Over the same period, Convergence estimates Canadian residential broadband subscriber additions in 2019 were the highest yearly additions in more than a decade. On the wireless side, Convergence estimates Canadian wireless service ARPU declined only slightly in 2019.
Looking more deeply at the data in its The Battle for the Canadian Couch Potato: OTT and TV, April 2020 report, based on 43 OTT services (more than 30 providers) led by Netflix, Convergence estimates OTT access revenue in Canada grew 37% to $1.53 billion in 2019, and it is forecasting 36% growth to $2.07 billion for 2020, and $3.04 billion for 2022, according to data provided by Convergence in a release. Growth in this area will continue to mostly benefit non-Canadian players, the company added.
The Victoria, B.C.-based market research firm says its forecasts are based on the assumption the coronavirus pandemic will not be a major disruptive force beyond 2020.
In terms of Canadian cable, telco and satellite TV access, Convergence estimates revenue in this segment declined 2% to $8.38 billion in 2019, and the firm is forecasting further declines going forward.
Convergence estimates 2019 saw a decline of 283,000 Canadian TV subscribers, and 2018 experienced a decline of 262,000 TV subscribers. It is forecasting a decline of 388,000 in 2020. Canadian TV subscribers declined per annum by 2.5% on average in 2018 and 2019, and the research forecasts a 4% decline on average per annum for 2020-2022, according to the emailed data.
As of year-end 2019, Convergence estimates 32.5% of Canadian households did not have a TV subscription with a cable, satellite or telco TV access provider, which is up from 30% of households at year-end 2018. It is forecasting the percentage of Canadian households without paid TV subscriptions will be 35.6% at year-end 2020 and 42% by year-end 2022. The company estimates 2019 saw 420,000 cord cutter/never household additions.
Canadian TV subscriber and access revenues are not declining at as steep a rate as that in the U.S., but this could change in the medium term, dependent on new or expanded OTT offerings in Canada, Convergence says.
In comparison, U.S. cable, telco and satellite TV access revenue declined 3% to US$100.4 billion in 2019 and Convergence forecasts a decline of 6% to $94.8 billion in 2020 and higher percentage declines in 2021 and 2022. Furthermore, U.S. TV subscribers declined by more than 7% in 2019, and by more than 4% in 2018, and Convergence forecasts a 9% decrease in 2020 and higher percentage declines in 2021 and 2022.
“Canada is increasingly being impacted by the global OTT war being waged by large American and international programmers and independent OTT providers,” reads the report. “Although for US and international programmers Canada is a direct to consumer opportunity as well as an opportunity to sell to Amazon, Apple, DAZN, Netflix and Quibi, Canadian programmers and linear/OTT providers continue to remain an attractive alternative.
“On the one hand, DAZN’s procurement of soccer, the new Disney+ offering, Discovery’s GolfTV and NBCUniversal’s hayu, impinge on the Canadian TV/OTT model, on the other in large part thus far WarnerMedia’s HBO, CBS (2 Star Treks)/Showtime, Lionsgate’s Starz have all chosen not to go DTC or sell to independents, instead making long-term deals with Bell for linear and OTT,” reads the report.
“We believe Netflix no longer has the same flexibility to raise pricing as frequently as it has in the past. Alternatively, Amazon and Apple have the luxury of expensing OTT programming as an additional operating cost to their core businesses,” adds the report.
Turning to its Battle for the Canadian Couch Potato: Bundling, TV, Internet, Telephone, Wireless, April 2020 report, the research estimates Canadian residential broadband subscriber additions were 455,000 in 2019, and revenue grew 7% to $9.3 billion. The report estimates residential broadband subscriber additions in Canada will moderate in 2020, and although cable continues to lead on residential broadband market share, telcos continues to outnumber cablecos on annual subscriber additions.
With the introduction of unlimited wireless plans by the incumbents, the government’s price reduction mandate, as well as the presence of Videotron’s Fizz and Shaw’s Freedom Mobile in the market, Convergence also expects incumbent wireless ARPU pressure to continue. It estimates 2019 Canadian wireless service ARPU declined by 0.8% and the research firm is forecasting a decline of 1.7% for 2020. It estimates that half of Canadian households currently no longer have a landline.
All of Convergence’s recent Couch Potato reports can be found here.
