On average, NPD found that consumers’ monthly bill for basic or premium TV service increases roughly six percent per year, despite consumer household income remaining essentially flat. In 2011, the average monthly bill was $86, but the monthly cost will rise to $123 in 2015, and a whopping $200 in 2020, according to NPD’s findings. The study also shows that 16 percent of U.S. households don’t subscribe to a pay-TV service but expect that number to rise around 2013-2014 when the average monthly bill tops $100.
The research firm estimates that most of the cost increases are due to higher TV program licensing fees. So for instance, ESPN wants another $1.50 per month for every subscriber that get’s Comcast’s standard cable TV package — which in turn, gets passed along to the subscriber.
Right now the big cable companies probably aren’t worried that a six percent increase to monthly bills will hurt subscriptions. Partially, this is due to the recent news that overall cable TV subscriptions are up compared to last year. But eventually, those companies will have to do something, either by offering fewer channels or lower priced subscription packages. However, NPD thinks cable companies will have to go a step further.
“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 NPD Group Research Director Keith Nissen in the report. “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.”
We know that some companies are now trying to mimic the success of Netflix by boosting their digital OnDemand streaming video libraries. This has been moderately successful in keeping people from canceling their monthly service in favor of high-speed broadband and a Netflix subscription, but it’s almost too early to tell.
Money in TV image: Dean Bertoncelj/Shutterstock