April 10, 2012
| by Rachel Cericola
We know that you love Game of Thrones, but would you be willing to pay $200 a month for that viewing privilege? According to a new report by the NPD Group, that could be a reality sooner than you think.
A new report by the market research company says that the average pay-TV subscription for basic pay-TV service and premium-TV channels reached about $86 in 2011. However, that price seems to be on the rise, and could go as high as $123 by 2015. Even more frightening is that NPD is predicting that those bills could be as high as $200 by 2020.
The report, titled “Digital Video Outlook,” says that 16 percent of U.S. households don’t subscribe to pay-TV services. With NPD’s pricing estimates, it’s easy to see why. However, the company says that pay-TV subscriptions haven’t really dropped off, thanks to bulk-service pay-TV contracts with apartment complexes and homeowners 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.”
Another NPD report, “Entertainment Trends in America,” says that cord cutters are cancelling pay-TV subscriptions mainly due to economic considerations. However, they are not completely going without that entertainment fix, instead turning to OTA programming, free web TV, and lower-cost video-on-demand (S-VOD) services, such as Netflix.
That said, 59 percent of pay-TV subscribers prefer one provider for services, with 21 percent looking to multiple providers. About 62 percent want premium TV from their pay-TV provider directly, or another affiliated service. Only 20 percent of subscribers are willing to cancel pay TV in favor of getting programming online.
“Pay-TV providers offer a convenient, one-stop shop for subscribers, and the majority of customers like it that way,” said Russ Crupnick, NPD’s senior VP of industry analysis. “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.”
Over the past 15 years, Rachel Cericola has covered entertainment, web and technology trends. Check her out at www.rachelcericola.com.