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20% of Consumers See Online TV as Pay TV Replacement

ABI Research said that about 20 percent of consumers would consumer such a move, posing a threat to about $16.8 billion of the operators' revenue base. Pay TV is actually on a decline and the market research firm says US household penetration will drop by about half a percent over the next five years.

To curb the revenue decline, TV operators should use "improved online and over-the-top (OTT) video experiences," ABI stated. "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," says Sam Rosen, practice director, TV and video at ABI Research.

In this context, ABI noted that Disk Network's acquisition of Blockbuster video with the intent to capture market share from Netflix has been a failure since Blockbuster was not able to acquire appealing content. Verizon's partnership with Redbox will also have to go beyond the simple availability of movies.

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