New research forecasts that monthly pay-TV bills, which hit an average of $86 for basic and premium TV service last year, could top $200 by 2020. The NPD Group said that despite consumer household income remaining essentially flat, pay-TV rates have climbed an average of 6 percent per year. It said rates should hit $123 by 2015.
About 16 percent of U.S. households don't get pay-TV, NPD said in its recent "Digital Video Outlook" report.
"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."
While analysts, including NPD, have blamed cable subscription losses on the competition from other pay TV services, an increase in over-the-top delivery, but they've been most concerned about the number of subscribers who blame economic conditions for their cord cutting.
NPD said it believes consumers still want their pay-TV providers to be "central and relevant to the acquisition and viewing experience."
NPD said 59 percent of pay-TV subscribers preferred having one single provider for their pay-TV services, compared to 21 percent who desired multiple providers. 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 Russ Crupnick, senior vice president of industry analysis for The NPD Group. "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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