NPD: Pay-TV Services Remain Popular - Twice

NPD: Pay-TV Services Remain Popular

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Port Washington, N.Y. - Despite growing awareness and use of over-the-top streaming video services, U.S. consumers continue to show a reluctance to ditch their pay-TV service providers, an NPD Group study shows.

Many will actually pay up to an average $123 month per month on cable, satellite and telco TV bills by 2015, it noted. 

According to

NPD's "Digital Video Outlook"

report, pay-TV subscription for basic pay-TV service and premium-TV channels in the U.S. reached $86 in 2011.

As TV program licensing fees have risen, pay TV monthly rates have also grown an average of 6 percent 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.

NPD said 16 percent of U.S. 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.

Despite this, total pay-TV subscriptions have not declined much, due 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," stated Keith Nissen, NPD research director. "Much needed structural changes to the pay-TV industry will not happen quickly or easily -- however, the emerging competition between S-VOD [ subscription video-on-demand] and premium-TV suppliers might be the spark that ignites the necessary business-model transformation of the pay-TV industry."

Another NPD study, called "Entertainment Trends in America," said that pay-TV cord cutters cancelled their subscriptions primarily for economic considerations; however, they are still accessing TV programming from free-to-air broadcast, free Internet TV, as well as via lower-priced 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, NPD industry analysis senior VP.

In fact, 59 percent of pay-TV subscribers preferred having one single provider for their pay-TV services, compared to 21 percent who desired multiple providers, and 21 percent who expressed no preference, NPD said. 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 favorite shows online.

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