In the days before broadband was reaching the majority of U.S. households, a PayTV subscription was essential to the well-informed and happily entertained consumer. The only way to see the news at 3 AM, catch the latest Michael Jackson video or watch a Star Trek re-run was with a PayTV subscription. Without it, the news was at eleven, the show re-run was - maybe - at seven and the Michael Jackson video? Probably never! PayTV became so valuable to consumers that it was elevated to utility status with the bill filed side-by-side with electricity and water.
Today, the situation could not be more different. In the majority of U.S. homes, all of the content discussed above - plus a tsunami of other video - is available 24x7 on the web. As well, the video is provided on very different terms than a standard cable subscription. It is often provided free ad-supported and sometimes for a small subscription fee or pay-per-view charge. But what have these changes done to the value of a PayTV subscription?
This week, Craig Moffett, an analyst at Sanford C. Bernstein in New York, reported that the top six publicly traded PayTV providers - Comcast, DirecTV, Dish Network, Time Warner Cable, Charter and Cablevision - collectively lost 580,000 customers. Mr. Moffett went on to cite the young as a group that is finding the PayTV proposition less attractive. But it's clear the value proposition is compromised for a much broader audience than that.
We asked 2000 adults that subscribe to broadband and PayTV how likely they were to downgrade their PayTV service - drop a premium channel like HBO or move to a lower channel tier. In 2010, 17% told us they were likely to do so. In 2011, that number has grown to 25%. This dramatic rise is a pretty clear indication that a large number of PayTV subscribers see significantly less value in what they are getting from the service.
Can this value erosion be reversed? Perhaps the key is in the approaches being adopted by the BBC iPlayer - as discussed elsewhere in this week's monitor - PBS.org and HBO2Go.
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