Market Analysis – 83121701 – Television related services

Market Analysis: Television Related Services (UNSPSC 83121701)

Executive Summary

The global Pay TV market, representing television-related services, is a mature and contracting industry with a current estimated total addressable market (TAM) of $177.4 billion. The market is projected to decline at a 3-year compound annual growth rate (CAGR) of -1.9% as it faces intense competition from Over-The-Top (OTT) streaming platforms. The single greatest threat is "cord-cutting," driven by consumer and business preference for flexible, lower-cost streaming alternatives. The primary opportunity for procurement lies in leveraging this market pressure to negotiate shorter, more flexible contracts and unbundle services to reduce enterprise spend.

Market Size & Growth

The global market for traditional television services (cable, satellite, IPTV) is experiencing a structural decline. While still a significant spend category, growth is concentrated in developing regions, while mature markets like North America are contracting. The primary driver of remaining value is the exclusive licensing of live sports and news, which commands premium pricing.

Top 3 Geographic Markets (by Revenue): 1. North America: Largest but fastest-declining market. 2. Asia-Pacific: Driven by volume in India and China; shows modest growth. 3. Europe: Mature market with moderate subscriber losses.

[Source - Statista, Feb 2024]

Key Drivers & Constraints

1. Constraint (Demand): Persistent "cord-cutting" and "cord-shaving" as users migrate to on-demand OTT streaming services (e.g., Netflix, Disney+, Max) for entertainment content, eroding the traditional subscriber base.
2. Driver (Content): Exclusive rights to premium live content, particularly major sports leagues (NFL, NBA, Premier League) and 24-hour news, remain the primary value proposition and retention tool for traditional providers.
3. Constraint (Cost Input): Escalating content acquisition costs, especially retransmission fees for broadcast channels and sports programming rights, are passed directly to customers, fueling price hikes and accelerating subscriber churn.
4. Driver (Bundling): Providers are increasingly reliant on bundling TV services with high-margin broadband internet to retain customers. This "triple-play" or "quad-play" strategy increases customer stickiness but masks the declining value of the standalone video product.
5. Driver (B2B Demand): Stable demand exists in commercial sectors like hospitality, healthcare, and corporate offices (lobbies, break rooms) that require reliable, centrally managed, public-viewing solutions not easily replicated by consumer-grade streaming apps.
6. Constraint (Technology): The capital-intensive nature of maintaining and upgrading cable (DOCSIS) and satellite infrastructure limits providers' ability to compete on price and flexibility with asset-light OTT players.

Competitive Landscape

Barriers to entry are High, defined by massive capital investment for network infrastructure, complex and expensive long-term content licensing agreements, and significant regulatory hurdles.

⮕ Tier 1 Leaders * Comcast (Xfinity): Largest U.S. cable provider; differentiates with deep integration of its high-speed internet service (Xfinity 10G) and proprietary Flex/X1 platform. * Charter Communications (Spectrum): Second-largest U.S. cable provider; focused on broadband-led growth and simplified service packaging across a wide geographic footprint. * AT&T (DirecTV): Leading U.S. satellite provider (now a separate entity co-owned by AT&T and TPG); differentiates with near-universal national coverage, particularly in rural areas, and extensive sports packaging (e.g., NFL Sunday Ticket, now shared with YouTube TV). * Dish Network: Second-largest U.S. satellite provider; competes on price and flexible packaging, while strategically pivoting to build out a 5G wireless network.

⮕ Emerging/Niche Players * YouTube TV / Hulu + Live TV: Virtual MVPDs offering "cable-like" channel bundles over the internet; now offering enterprise/business packages that directly compete with traditional B2B offerings. * SONIFI Solutions: B2B-focused provider specializing in integrated solutions for the hospitality and healthcare industries, combining television, streaming, and guest engagement platforms. * Mood Media: Provides curated in-location media solutions for businesses, including television programming, often bundled with digital signage and background music.

Pricing Mechanics

The pricing model for television services is an opaque build-up of multiple fee structures. The advertised "package price" represents only a portion of the total monthly cost. The final price is an aggregate of the base programming tier, add-on packages (e.g., sports, premium movies), and a significant number of pass-through fees and surcharges. These surcharges, often buried in fine print, include Broadcast TV Fees and Regional Sports Network (RSN) Fees, which are direct pass-throughs of the provider's fastest-growing input costs.

Equipment rental for set-top boxes, DVRs, and remote controls adds a recurring per-device charge. Installation and service calls are typically one-time fees but can be recurring in enterprise master service agreements. For enterprise clients, pricing is often negotiated based on the number of locations, number of displays per location, and required service levels, but the underlying cost drivers remain the same.

Most Volatile Cost Elements (Annualized): 1. Retransmission Consent Fees: est. +12% to +15% 2. Regional Sports Network (RSN) Fees: est. +8% to +10% 3. Installation & Service Labor: est. +4% to +5% (reflecting general wage inflation)

Recent Trends & Innovation

• Sports Content Fragmentation (June 2022): Apple acquired global rights to Major League Soccer for 10 years, moving the entire league behind its Apple TV+ paywall and away from traditional cable/satellite. This highlights a trend of major tech players bidding for sports rights, further splintering the content landscape.
• vMVPDs Enter B2B Market (Q3 2022): YouTube TV officially launched specific commercial offerings for businesses like bars, gyms, and offices, providing a viable, often lower-cost, streaming-based alternative to traditional cable/satellite for business use cases.
• Satellite Consolidation Talks (July 2023): Dish Network and EchoStar announced a merger, following persistent reports of strategic discussions between Dish and DirecTV. This signals a move toward consolidation in the declining satellite market to achieve operational scale and cost synergies. [Source - Reuters, Aug 2023]
• The RSN Collapse (Ongoing): Diamond Sports Group, the largest owner of Regional Sports Networks, declared bankruptcy (March 2023), disrupting local sports availability for numerous MLB, NBA, and NHL teams and creating uncertainty for providers and viewers.

Supplier Landscape

Note: Market share estimates are for the U.S. Pay TV market (including vMVPDs) and are approximate.

Regional Focus: North Carolina (USA)

Demand for television services in North Carolina is robust, mirroring the state's strong population and economic growth, particularly in the Charlotte, Raleigh-Durham (Research Triangle), and Piedmont Triad metro areas. This drives B2B demand in corporate campuses, multi-dwelling units (MDUs), hospitality, and healthcare facilities. The supplier landscape is dominated by Charter (Spectrum), which has a near-monopoly on cable services in most major markets. AT&T offers both DirecTV (satellite) and a growing AT&T Fiber (IPTV) footprint. Labor costs for installation and service are aligned with the national average but are rising in high-growth urban centers. There are no significant state-level taxes or regulations that materially differ from federal frameworks, making it a representative market for sourcing strategy.

Risk Outlook

Actionable Sourcing Recommendations

1. Audit Usage & Unbundle Services. Conduct a site-level audit to identify non-essential television placements (e.g., break rooms, low-traffic areas). For these locations, replace high-cost traditional cable packages with enterprise-grade streaming services (e.g., YouTube TV for Business). This can reduce per-location spend by est. 20-30% while retaining service in critical, client-facing areas.
2. Negotiate for Flexibility, Not Price. Given that content costs are largely non-negotiable, focus negotiations on contract terms. Mandate a maximum 24-month term with no auto-renewal and secure clauses that permit service-level reductions or cancellations with a 60-day notice without penalty. This builds agility to exit agreements as more cost-effective streaming solutions for enterprise become available.