Skip to main content

Pay-TV High Cost Continues to Drive Shrinking Demand

Video entertainment demand has been evolving rapidly. Yet traditional pay-TV service providers are still challenged to address the needs of more progressive consumers. Case in point: subscriber awareness of their "TV Everywhere" offerings -- the ability to watch programming from their pay-TV provider on devices other than a TV -- remains low at 36 percent, which is unchanged since 2013.

Meanwhile, pay-TV marketers are attempting to capitalize on another growing trend. Skinny bundles, TV subscription packages composed of selected channels targeting specific customer segments, have the potential to attract elusive younger consumers to pay-TV, according to the latest market study by Altman Vilandrie & Company.

However, their survey also finds that two-thirds of older consumers, typically the most loyal subscribers of legacy pay-TV, say they are wasting money for channels they don’t use -- so, skinny bundles could cannibalize the service provider's existing subscriber base.

Skinny Bundles Market Development

Skinny bundles are designed to appeal to younger viewers, who have come to expect more consumer choices and flexibility, with targeted, affordable packages.

Nearly 70 percent of non-subscribing 18-24 year-olds -- more than any other age market segment -- agree that they would consider subscribing to pay-TV if there were "more affordable channel lineups that fit my viewing tastes."

The traditional pay-TV industry is anxious to appeal to young consumers, who subscribe at much lower rates than other age groups. This market segment includes both cord-cutters, who have dropped pay-TV, and cord-nevers, who have never subscribed (and likely never will, given the current cost of pay-TV services).

"The surprising level of dissatisfaction with unwanted channels we found among older subscribers shows the difficult balancing act skinny bundles create for pay TV providers," said Jonathan Hurd, director at Altman Vilandrie & Company. "It is critical for providers to design optimal bundles that maximize adoption of new subscribers while simultaneously limiting appeal to existing customers – no small task, based on simulations we've run using the survey findings."

Skinny bundles of live TV channels from internet providers Sling TV, PlayStation Vue, and soon Hulu seek to target price sensitive consumers who are comfortable watching online video. But Dish’s new Flex Packs have extended the skinny bundle concept to traditional pay-TV.

Skinny bundles may end up attracting older consumers disproportionately: 63 percent of pay-TV subscribers aged 55 and older -- more than any other age range -- agree that they are "wasting money because my pay TV service includes many TV channels that my household does not watch."

Outlook for Pay-TV Subscriber Growth

And yet, this age group is far less likely to switch to online video services -- only 30 percent watch TV shows or movies online weekly -- but may end up downsizing to skinny bundles that include traditional pay-TV channels.

The survey confirmed that young consumers turn to more economical online video options rather than traditional pay-TV services. Seventy-five percent of 18-34-year-olds watch online video from Netflix, Amazon Prime, or Hulu Plus at least once per week -- that's far more than the 22 percent of consumers age 55 and above.

And the trend among younger consumers toward online sources continues to grow. In a typical week, nearly 80 percent of 18-24-year-olds watch TV shows or movies on the Internet -- that's up from 60 percent five years ago.

Popular posts from this blog

Why Europe's AI Investment Surge is Strategic

When enterprises begin treating AI budget as the line item they protect last when cutting elsewhere, the market has crossed a threshold that analysts rarely name explicitly. That is precisely where Europe now stands. A new forecast from IDC projects European AI spending will reach nearly $470 billion by 2030, expanding at a 35 percent CAGR over the next five years. European enterprises are allocating capital toward AI because the operational returns on cost efficiency, risk mitigation, and resilience are now demonstrable enough to justify sustained budget commitment. The strategic implication is significant: AI has moved from the innovation portfolio into core operational infrastructure. European AI Market Development Generative AI solutions, already embedded across enterprise deployments, are expected to account for more than 55 percent of the total market by the end of the forecast period.  Software is both the largest technology segment, at 54.9 percent of total spending in 2026...