Television services in the United Kingdom saw a modest gain of 83,000 subscribers in the first quarter of 2017. It was the second smallest growth in four years. Yet the majority of homes now pay for television and the number has been steadily rising, driven mainly by online services. So will that proportion continue to grow, or has pay television reached its peak?

Sky added 40,000 customers in the United Kingdom and Ireland in the first quarter of 2017, taking its total to 12.69 million, a number that includes all its retail services, not just television subscribers. It was the second smallest quarterly growth in recent years.

Virgin Media grew its television customer base by 46,000, its first substantial increase for seven years, but with 3.78 million subscribers it now has exactly the same number it had five years ago. However, it lost 5,000 television customers in Ireland, where it has shed 63,000 over the last five years.

BT gained 11,000 television subscribers, which was its lowest growth for 11 quarters. BT has a million more television customers than it did five years ago but with a total of 1.75 million it is still far short of the 2-3 million it originally anticipated reaching by 2012.

TalkTalk lost 14,000 television customers, its fifth consecutive quarterly loss, as it fell back to fewer than 1.30 million. At the end of 2015 it had more than BT.

The numbers suggest a stagnation in pay television across the nation. Yet if we look at pay television in the United Kingdom over the last four years, the total number of subscribers has risen from 15.63 million to 19.50 million homes.

Television subscribers in the United Kingdom to 2017 Q1. Source: informitv Multiscreen Index.

This has been driven by continuing growth for Sky, although that number covers Ireland and all retail customers, including its NOW TV online service, and the development of lower cost services from BT and TalkTalk.

According to BARB universe estimates, there are 26.75 million television homes in the United Kingdom, of which 10.60 million have satellite, 4.15 million have cable, and 19.29 million receive terrestrial transmissions, which includes hybrid services from telcos. Clearly there is some duplication, with many homes receiving terrestrial television on secondary sets. The satellite number includes homes that receive free to air services. It is not entirely clear why BARB estimates there are 375,000 more cable homes than Virgin Media actually reports.

Nevertheless, based on BARB universe data, the proportion of pay-television homes in the United Kingdom passed the number relying on free television in 2012 and has remained at about 54%, as the total number of homes has risen. So the penetration of pay-television homes appears to have levelled off.

Proportion of free versus pay television homes in the United Kingdom. Source: Ofcom, Communications Market 2016; BARB.

The key question is whether the proportion of homes paying for television will continue to rise, driven by services delivered online. Or, will there be revival in free television, as people shun expensive cable or satellite packages and supplement their viewing with subscription video on demand services? Our expectation is that we will see an increasing hybrid of free television topped up with subscription services, which is after all still the core of the pay television proposition.

The informitv Multiscreen Index tracks 100 leading pay-TV services worldwide and is published quarterly.