Date: 22/01/2025
Publication: WARC
Rob Collier, co-author of a UK government report on the future of TV distribution, outlines how changes in technology will impact marketers’ ability to reach audiences through TV screens.
The relentless transmutation of TV has been extraordinary by any measure. What was the main focus in our sitting rooms has become the main focus on laptops in studies, on tablets in kitchens and on phones in bed. Internet TV (IPTV) has enabled anyone, anywhere to watch content from broadcasters and other providers from all over the world.
But in amongst this incredible march towards always-on, always-at-hand content, there’s an urgent need to fully understand the implications of this rapid pace of change, assess the current status quo, and look at the potential obstacles that require our attention either now or very, very soon.
The Future of TV Distribution report was prepared for the UK’s Department for Culture, Media and Sport to examine trends in distribution and consumption, and how this might evolve up until 2040. Its key goal is to look at the implications in the growing shift from broadcast to internet distribution of TV content. The research team was led by the University of Exeter alongside the University of Leeds and with key input and analysis from industry experts including MTM and 3 Reasons.
It highlights how, with Freeview licenses expiring in 2034 and growing pressure from mobile carriers to release some of the DTT spectrum for mobile services, the future of DTT is unclear. One key finding from our research is that, without intervention, 5% of homes (1.5 million) will still rely on digital terrestrial television in 2040, and are at risk of being left behind if the number of DTT channels is reduced, or all channels are switched off entirely.
Both the current identified trends, and the research into TV’s evolution up to 2040 have potential knock-on effects for marketers trying to capture audiences’ attention.
Where we are now
As the UK TV platform universe shifts from broadcast to IP-enabled technology, we’re witnessing a transition from ‘unconnected’ homes (solely reliant on broadcast) to ‘hybrid’ homes, ‘linear-IP’ homes (live TV over IP networks) and ‘OTT-only’ homes (i.e. Netflix, iPlayer, Amazon Prime).
A key factor in this shift has been the proliferation of IP-enabled smart TV sets as well as IP-enabled devices from players like Google, Amazon, Roku and a host of smaller players, to the point where there are now over 50 million IP-connectable interfaces available on primary sets across the 27 million TV homes in the UK.
Another significant factor has been the growth of video on demand (VOD) viewing, driven both by broadcaster (BVOD) offers as well as subscription (SVOD) offers. In the last five years, total SVOD subscriptions in the UK have grown from 17.9 million in 2018 to 41 million in 2023, with the average SVOD subscriber taking over 2.2 services.
What lies ahead
- Broadband rollout will continue across the UK, with our modelling forecasting that by 2030, 90% of UK homes will be fixed-line broadband subscribers with another 6.1% of homes accessing broadband solely through wireless technology. By 2040, we expect to see broadband penetration reach at least 98.6% – with 1.4% still without broadband.
- 3 Reasons forecasts that by 2030, 94% of TV homes will have an IP-connectable CTV as their primary set, and we project that by 2040 that will have risen to 99%.
- The increasing availability of linear content and channels over IP, especially from the public service broadcasters (PSBs). All the PSBs are now making their linear content available via IP. We assume that they will continue to expand IP delivery of their content.
- By 2028, we forecast that 72.8% of broadband homes will have at least one SVOD subscription and subscribe to an average of c. 2.3 services.
As a result of the above, we predict platforms and user interfaces will continue to accelerate towards greater connectivity. By 2040, we project that homes exclusively reliant on their CTV connection or a dongle or puck (our ‘OTT only’ cohort) will represent the largest segment of households (c.15 million) followed by a segment with both broadcast and online delivery (named ‘Hybrid homes’ at c. 7.4 million). Sky and Virgin are forecast to decline to 3.1 million and 2.7 million homes respectively.
What marketers need to know
The move to digital platforms has – naturally – challenged the traditional TV ad model, and led to the decline in broadcast advertising revenue. New global SVOD providers are also taking their share of pay TV and subscription revenue, and an increasing share of online video advertising due to new advertising tiers.
This proliferation of SVOD services is leading to increased competition in the pay TV landscape, as subscribers can switch between providers with greater ease than they can with traditional linear pay TV. This – in turn – drives greater returns to scale, and revenue ends up being funnelled away from local players towards the global giants like Netflix, Amazon and Disney.
Both Disney+ (2023) and Amazon (early 2024) have launched ad-supported pricing plans, targeting more cost-conscious customers. This has led to a substantial increase in the supply of ‘Tier 1’ ad inventory, adding to the pressure on declining traditional broadcast ad revenue.
Both brands and agencies have long been aware of the move to social media platforms (not part of the scope of this research) and IPTV offering better-tailored, more targeted ads compared to broadcast TV. Yet with a move to hybrid homes and IP distribution, there’s still the pull of broadcast for brand-led campaigns focussed on scale and reach, alongside the more targeted IPTV and digital ads available. The growth of linear IP will remain a string in the bow of major broadcasters, for now.
However, as the research outlines, there needs to be proper consideration of our move to IPTV. By 2040, 95% of UK homes will use internet-delivered TV services, but that small minority – 5% of homes – who look to still remain wholly reliant on digital terrestrial TV represents a sizeable number of households who won’t be reachable if DTT is switched off.
Ofcom is set to play a central role in implementing and enforcing the Media Act, a 2024 bill which lays out a modernisation outline for streaming platforms, broadcasters and online content providers. How they approach compliance and setting regulatory frameworks for digital and broadcast TV will define the next few years.
It’s these nuts and bolts that will define how marketers engage with consumers through their TV screens long into the future. In the meantime, the industry needs to make sure no one is left behind.