Findings from market research company The NPD Group indicate that the average pay-TV subscription for basic pay-TV service and premium-TV channels in the US reached $86 in 2011. As TV programme licensing fees have risen, pay TV monthly rates have also grown an average of 6 per cent per year, even as consumer household income has remained essentially flat. If nothing changes, NPD expects the average pay-TV bill to reach $123 by the year 2015 and $200 by 2020.
According to information from NPD’s recent Digital Video Outlook report, 16 per cent of US households do not currently subscribe to pay-TV services. A sharp rise in housing vacancies due to the mortgage crisis alone has led to five million fewer US households viewing pay-TV services. Total pay-TV subscriptions in the US have not declined much, as a result of bulk-service pay-TV contracts with apartment complexes and home owners associations that have allowed pay-TV operators to retain subscriptions in vacant homes.
“As pay-TV costs rise and consumers’ spending power stays flat, the traditional affiliate-fee business model for pay-TV companies appears to be unsustainable in the long term,” notes Keith Nissen, research director for The NPD Group. “Much needed structural changes to the pay-TV industry will not happen quickly or easily; however, the emerging competition between S-VOD and premium-TV suppliers might be the spark that ignites the necessary business-model transformation of the pay-TV industry.”
Based on the latest information from NPD’s Entertainment Trends in America report, pay-TV cord cutters reported cancelling their subscriptions primarily because of economic considerations; however, they are still accessing TV programming from free-to-air broadcast, free Internet TV, as well as via lower-priced subscription video-on-demand (S-VoD) services, such as Netflix.
“Despite the plethora of OTT options for movies and TV, most consumers want their pay-TV providers to be central and relevant to the acquisition and viewing experience,” advises Russ Crupnick, senior vice president of industry analysis for The NPD Group. In fact 59 per cent of pay-TV subscribers preferred having one single provider for their pay-TV services, compared to 21 per cent who desired multiple providers, and 21 per cent who expressed no preference. Sixty-two per cent of subscribers wanted premium TV either delivered by their pay-TV provider directly, or from a service affiliated with their pay-TV provider. Only 20 per cent of pay-TV subscribers were likely to cancel their pay-TV service, if they could get their favourite shows online
“Pay-TV providers offer a convenient, one-stop shop for subscribers, and the majority of customers like it that way,” said Crupnick. “There is an open window for the industry to meet consumer needs and become to television what iTunes is to music; however, there is also a definite risk if pay-TV providers don’t capitalise on the opportunity – and soon,” he warns .