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SNL Kagan: pay-TV has ‘competitive advantage’ with EST

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JP O’Sullivan, Associate Analyst at SNL Kagan, speaking at the Connected TV Summit in London

By Barry Flynn, Contributing Editor

Electronic sell-through (EST) is a small but growing sector, according to consultants SNL Kagan, and pay-TV operators are best-placed to exploit it.

Speaking at the Connected TV Summit in London, JP O’Sullivan, Associate Analyst at Kagan, quoted figures from the US industry organisation, the Digital Entertainment Group, showing that total entertainment revenues across all segments had declined by nearly 2% between 2013 and 2014.

However, EST had grown by nearly a third over the same period, increasing from $1.19 to $1.55bn, and accounting for over a fifth of total digital entertainment revenues (see Figure 1 below).

Figure 1: US growth in digital entertainment ($m)




YoY (%)

Total Entertainment (all segments)




Total Digital




Electronic Sell-through (EST)








Subscription Streaming





EST as % of Total Entertainment




EST as % of Total Digital




Source: Digital Entertainment Group, 2015

In the UK, meanwhile, where the overall video sales market was worth £2.18bn in 2014, according to the Entertainment Retailers’ Association, sales of physical entertainment formats have been in decline since 2012, and now account for under £0.4bn in revenues.

“The Office of National Statistics commissioned a consumer durables survey, and that has indicated that we have seen five years of consecutive decline in the number of households that actually own DVD players,” noted O’Sullivan, “and there have also been problems on the High Street with HMV and Blockbuster, and also with W H Smiths retreating from the sale of physical media.”

As in the US, this has meant that total video sales (including physical sales, digital subscription and EST) have been either flat or in marginal decline.

Based on the example of Sky Europe, the EST picture nevertheless looks buoyant on this side of the Atlantic. Across UK, Ireland, Italy and Germany, Sky Europe’s first-half transactional revenues rose from £56m in 2013 to £62m in 2014, jumping to £75m in 2015, equivalent to a CAGR of +16%.

Indeed, according to Sky at the time of its nine-monthly figures to 31st March 2015, “Our fastest rate of growth was in transactional revenues, up 19% to £120 million driven by the early success of Sky Store in the UK, which included incremental revenues this year from our Buy & Keep service launched in April 2014.”

O’Sullivan argued that pay-TV operators like Sky have a competitive advantage when it comes to delivering EST. They have large installed bases of connected set-top boxes (Sky UK and Ireland now has over 7m), and they are experts on viewer behaviour and therefore understand video audiences.

They also have long-standing relationships with the studios, enabling them to negotiate the EST rights to high-value premium content.

O’Sullivan warned that there nevertheless remained challenges for EST to overcome. While viewers might put up with buffering from free-to-air content consumer on-demand, the same did not apply to EST, which was a premium product involving high-quality movies often sold at prices of £10 or above.

Meanwhile, there was a “difficult balancing-act” involved in preventing audience cannibalisation between an operator’s linear, VOD and EST offerings.

Finally, there were pricing barriers where the content did not involve an impulse buy: consumers might consider it cheaper to buy a physical version and receive it in a few days than pay for the high-priced EST version which could be viewed later. 

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