5 mn fewer US households viewing pay-TV service: Study

MUMBAI: Indian broadcasters having international subscription revenues have reasons to be worried. 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, according to a recent market research study.

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.

According to information from NPD’s recent “Digital Video Outlook” report, 16 per cent of US households do not currently subscribe to pay-TV services.

The NPD Group research director Keith Nissen said, “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. 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.

NPD Group senior VP of industry analysis Russ Crupnick said, “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. In fact 59 per cent of pay-TV subscribers preferred having one single provider for their pay-TV services, compared to 21 percent who desired multiple providers, and 21 per cent 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 favourite shows online.

The average pay-TV subscription for basic pay-TV service and premium-TV channels in the US reached $86 in 2011, according to market research company NPD.

As TV programme licensing fees have risen, pay TV monthly rates have also grown an average of six per cent
per year, even as consumer household income has remained essentially flat. If nothing changes, NPD expects the average pay-TV bill to reach $123 by the year 2015 and $200 by 2020.

Crupnick said, “Pay-TV providers offer a convenient, one-stop shop for subscribers, and the majority of customers like it that way. 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.”

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