New subscriber services are pushing ARPU up to the extent that pay-TV revenues are now greater than commercial advertising, writes Julian Clover
Having once volunteered the suggestion that cablenets were prepared to sacrifice customers on their lowest tiers to concentrate on more lucrative customers, to be promptly told I was completely wrong, I’m nervous to put it forward again.
The flaw in my argument is the subscriber acquisition cost. Put simply however little a subscriber is paying they are more than worth hanging onto given the cost of retrieving them from another operator somewhere down the line.
This is why churn, the monthly count of subscribers leaving a platform, is important to keep as low as possible. Otherwise you spend even more on subscriber acquisition just to stand still.
The reason why I bring this up is that DTT is continuing to erode basic cable, particularly in markets where the DTT offer is largely free, and presumably would lure across subscribers in even greater numbers were cable not to have the attractions of on demand and, unsurprisingly broadband, to keep the rival platforms at bay. Little wonder that the satellite platforms are looking to both genres to ensure they hold onto their own subscriber bases.
According to figures released this week by Ofcom the amount of revenue derived by operators from their subscriber bases continues to increase, the result of higher subscription rates (though we know that this can also have an effect on churn), and the launch of new products such as PVRs and HD.
The amount of ARPU (Average Revenue Per Unit) grew among pay-TV operators in Italy, the UK, Poland and Sweden (3.6%, 1.2%, 1.3%, 1.6%). Even greater increases were recorded in Canada, Japan and the United States. Put this against a two-point reduction in advertising, and according to Ofcom, this makes 2007 the first year when subscription revenues made a greater contribution to total TV revenues than the commercial break. Presumably all the PVRs that encouraged people to skip the commercials in the first place were a contributing factor.
The US market is where the highest amount of revenue per head can be found, at £221 this is up 3.5% on the previous year, with the UK £50 behind and still second on £172. Poland is way behind on £42, but has added 17% in the last 12 months, indicating there is more to come.
It goes without saying that the current financial gloom may put a slight damper on revenues, though the public’s desire to stay in and watch TV is more than optimism from those that lived through the downturn of the early 1990s.
The Netherlands has 95% cable penetration and while these homes are clearly not all paying a fortune for their TV content, it suggests that many in the world are prepared to pay at least something.
