Media The Future of TV: Unbundle, re-bundle or aggregate?

TV1.0 (90s to 2019) was dominated by bundled linear monopolies with high ROIC. The evolution of TV is likely to follow two phases:
(i) TV2.0 (2019-2024) – a streaming land grab phase dominated by unbundling; and;
(ii) TV3.0 (2025-2030) – a consolidation phase - dominated by re-bundling and/or aggregation of services.
This report examines how this transition will significantly impact Global media companies.

UBS's Global media team has built a global Subscription video on demand (SVOD) model. It forecasts streaming customers using an "S" curve penetration function, a stacking rate (subscriptions per household) based on UBS Evidence Lab surveys and ARPUs based on in-country pricing. Our base case forecasts a total market of $167bn by 2030 with global penetration of ~55% and ~3 subscriptions per household with US and China account for ~50% of global subscribers.

The economics of streaming are challenging with large upfront investments required in marketing, streaming technology and original content to gain scale. This, combined with lower Average revenue per user (ARPU), higher churn (or subscription switching) and more competition means profitability could be challenging for sub-scale players. Based on UBSe Monte Carlo analysis there is an 85% probability of a reasonable ROIC for large-scale SVOD operators.

UBS has built a qualitative model that ranks media companies in each phase of the TV evolution based on competitive intensity, discovery, adoption, distribution platform and ROIC.