The average pay-TV bill might reach $123 by the year 2015 and $200 by 2020, according to market research company NPD Group.
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 for broadcasters have risen, pay TV monthly rates have also grown an average of 6% per year, even as consumer household income has remained essentially flat. If nothing changes, the $200 price point will be reached by 2020.
According to information from NPD’s recent Digital Video Outlook report, 16% 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 U.S. households viewing pay-TV services. Total pay-TV subscriptions in the US 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 consumers’ 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 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, like 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,” said Russ Crupnick, SVP of industry analysis for NPD.
In fact 59% of pay-TV subscribers preferred having one single provider for their pay-TV services, compared to 21 percent who desired multiple providers, and 21% 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% of pay-TV subscribers were likely to cancel their pay-TV service, if they could get their favourite shows online.
