Skip to main content

U.S. Pay-TV will Become a Luxury Consumer Item


According to the latest market study by The NPD Group, the average monthly pay-TV subscription fee for basic pay-TV service and premium-TV channels in the U.S. has reached $86 in 2011. As channel licensing fees continue to rise, pay-TV subscriber rates have grown an average of 6 percent per year -- while American consumer household income remained flat.

If nothing changes, NPD forecasts that the average pay-TV monthly payment will reach $123 by the year 2015 and $200 by 2020. I've previously reported about the U.S. sports networks, ESPN in particular, and how they're a significant part of the rising costs problem for all pay-TV service providers. The forced bundling of these high-cost channels merely aggravates the situation -- because a-la-carte channel selection is not an option.

According to the findings from NPD’s recent study, 16 percent of U.S. households do not subscribe to pay-TV services. Moreover, the recent U.S. economic troubles have resulted in five million fewer American households subscribing to pay-TV services -- which are already considered a luxury item by some people.

To date, the total pay-TV subscriptions in the U.S. have not declined much, due to 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 consumer spending power stays flat, the traditional affiliate-fee business model for pay-TV companies appears to be unsustainable in the long term,” said 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 other market studies by NPD, the growing phenomenon of pay-TV "cord cutters" who reported cancelling their subscriptions is primarily driven by economic considerations -- the perceived low-value for the subscription high-price. However, some consumers are still accessing TV content from free-to-air broadcasts, free streaming TV via the Internet, as well as via lower-priced subscription video-on-demand (S-VOD) services, such as Netflix.

"Despite the plethora of over-the-top (OTT) options for movies and TV, most consumers want their pay-TV providers to be central and relevant to the acquisition and viewing experience," said Russ Crupnick, senior vice president of industry analysis for The NPD Group.

In fact, 59 percent of pay-TV subscribers preferred having one single provider for their pay-TV services, compared to 21 percent who desired multiple providers, and 21 percent who expressed no preference.

Sixty-two percent 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 percent of pay-TV subscribers were likely to cancel their pay-TV service, if they could get their favorite shows online.

Of course, given the track record of perpetual subscription price increases, that scenario is subject to change -- everyone has their limit, where they will refuse to pay yet another increase.

"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 capitalize on the opportunity -- and soon."

Popular posts from this blog

Hybrid Work: How to Enhance Employee Productivity

When you hire qualified talent for a key role and trust them to perform, you'll likely achieve the best outcome. Skilled and experienced people will deliver results, regardless of the challenges. That's a key lesson learned from the pandemic experience as most knowledge workers were asked to work from their homes. However, some resist returning to an open-plan office. It's unacceptable. Meanwhile, forward-thinking leaders decided a "return to normal" is undesirable, and in hindsight, everyone should aspire to be more accomodating than before. Therefore, location flexibility is okay. Hybrid Workforce Market Development How will people adapt to these changes? They'll apply the modern IT tools at their disposal. They'll learn new skills and thrive. Nearly 80 percent of employees are now successfully using online collaboration tools for work in 2021 -- that's up from just over half of workers in 2019, according to the latest market study by Gartner. This g

Mobility-as-a-Service Creates Disruptive Travel Options

Building on significant advances in big data, analytics, and the Internet of Things (IoT), more innovative transit service offerings aim to increase public transport ridership and reduce emissions or congestion within metropolitan areas. By providing these services through smartphone apps, the transit services also significantly increase user convenience, providing information on different human mobility offerings -- including public transport, ridesharing, and autonomous vehicles. Mobility-as-a-Service Market Development According to the latest market study by Juniper Research, Mobility-as-a-Service (MaaS) subscribers will generate $53 billion in revenue for MaaS platform providers by 2027 -- that's rising from $5.3 billion in 2021. Let's start with a basic definition. MaaS is the provision of multi-modal end-to-end travel services through single platforms, by which users can determine an optimal route and price. The study identified a monthly subscription model as key to incr

Upside for New 5G Network Transport Infrastructure

The global mobile communication sector is in the midst of a significant network infrastructure upgrade to support the introduction of new high-bandwidth and low-latency broadband service offerings.  Telecom service provider data centers have an important role in fifth-generation (5G) network deployments. Providers undergoing their transition to Stand-Alone (SA) 5G must understand the technical demands of telco data centers and the key enablers of those offerings. According to the latest worldwide market study by ABI Research, the major prerequisites of 5G and the emerging transport solutions would help operators position themselves to successfully capitalize on the new revenue opportunities from delivering differentiated 5G connectivity services. 5G Transport Network Market Development "The rise of the telco data center has a high degree of confluence with the requirements of SA 5G architectures. SA 5G and its increasing reliance on telco data centers can be attributed to the incr