The operator said that it had 603,000 premium DTH subscribers at the end of September and that the decline in DTH subscribers appears terminal, with numbers falling continually in recent years. The company is now investing more in its Over-The-Top (OTT) pay-TV service ViaPlay as it bids to offset the decline in its DTH numbers.

The company is also bidding to offer its ViaPlay OTT to more subscribers as its customers start to move away from satellite.

   The continued fall of Viasat’s premium DTH numbers is provoking debate, as to whether satellite services have reached some kind of tipping point in Europe. In a research note, Patrick Wellington, a media equity analyst at Morgan Stanley, said it is probably too early to say if MTG’s numbers signal an industry trend, but that it is a very real world example of what could happen to other DTH operators around the world, particularly in the United Kingdom.

   “A profits warning at Nordic FTA and pay-TV operator MTG at the Q3 figures, concentrated in the pay TV business, has caused some disquiet in the BSkyB share price,” said Wellington. “The headlines of the MTG profits warning is that it is losing customers from its Viasat satellite DTH platform and that is investing more heavily in content and marketing in its OTT platform Viasat. On the face of it there appear to be analogies with BSkyB’s situation.        

   MTG’s satellite base has been in decline since 2007, when it peaked at just 714,000 subscribers. In 2008, MTG entered into a series of revenue share arrangements with major cable operators such as ComHem in Sweden to broaden its distribution capability beyond DTH in all the Nordic markets.

   Wellington said this was a priority in major cities where DTH operators have struggled to gain a foothold due to planning laws restricting the installation of dishes. “The contracts with third-party network operators facilitate direct marketing of pay TV services to the universe of cable, IPTV and broadband-only customers, many of whom could not previously receive Viasat channels,” said Wellington. “Third-party network subscribers now account for a third of Viasat’s total customer base from a standing start in 2007.”

   Despite the challenges, Wellington believes the satellite business for BSkyB remains strong. “The contrast is that BSkyB has continued to grow its satellite base despite the long established presence of cable and has continued to do so despite the arrival of IPTV based competition, such as BT Vision, which launched in the United Kingdom in December 2006, almost six years ago,” he said. “In the United Kingdom, BSkyB thus enjoys a large, resilient and even still growing DTH subscriber base to which it can up-sell a variety of high-margin products (multi-room, HD, broadband, etc.). It can then build on its success in DTH to try and tap into new markets through its own OTT offer, NowTV.”

   Other traditional DTH operators are also believers in OTT, even if their satellite businesses are still strong. In a recent interview with Via Satellite, Brian Sullivan, CEO, Sky Deutschland said, “We have, in fact, very quietly become the largest OTT pay-platform in Germany. We developed our ‘Sky Go’ service a few years ago, and have been giving it away as part of our improvement of the service to our HD customers. The take-up of Sky Go has been fantastic, and this has happened faster than we had anticipated: in the second quarter 2012, we recorded almost 6.9 million customer logins – as opposed to 1.3 million during the same period last year. I think our Sky Go service is one of the best of its kind in Europe.”

   For MTG, 2013 is likely to be a tough year as its look to reposition its business under new CEO Jørgen Madsen Lindemann. “The increasing competition levels in the Nordic region are currently expected to result in the Nordic premium pay-TV subscriber base (excluding Viaplay) continuing to decline with a stable total Nordic pay-TV sales development in Q4 and 2013,” said Lindemann. “The combination of this with the investments that we are making are therefore also currently expected to result in lower margins for our Nordic pay-TV business in Q4 and 2013 but will position us to grow our subscriber base, revenues and profits for the longer term. At the same time, the investments that we are making in the Emerging Markets pay-TV business are currently expected to boost our revenue growth but result in operating losses for the segment in Q4 and 2013.”

   The risk of OTT to satellite is becoming ever more prevalent. ABI Research has released a new study this week, which graphically underlines the threat. It says in the study that nearly 20 percent of online consumers consider online video as a replacement for pay-TV – representing significant risk to the traditional TV operator business of as much as $16.8 billion in the United States. It adds with the U.S. pay-TV household penetration set to decline approximately 0.5 percent per year through 2017, it says this will lead to a slow migration that will continue even with an economic recovery as consumers have additional entertainment choices like improved online and OTT video experiences. “While many OTT services focus on movies, the goal of lightweight pay-TV packages should be to introduce customers to the brand and tease customers with premium content offerings,” said Sam Rosen, practice director, TV and video, ABI Research.