Ouch. A new report projects pay TV costs to hit $200 a month by 2020.
With the rising costs of program licensing fees, pay TV subscription packages have increased an average of 6 percent per year, according to NPD Group's Digital Video Outlook report
. At the current rate -- one that outpaces inflation and household income, the latter of which has remained relatively flat -- the research firm expects average pay TV bills to reach $123 a month by 2015 and $200 by 2020. (NPD did not specify if these projections took inflation into account.) This trend, says the firm, is a reminder to cable and satellite TV operators they'll have to change their model.
"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, in a press release. “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.”
Even though the economy influenced cord cutters to forego cable in favor of over-the-top options, NPD Group says 59 percent of subscribers prefer having a single provider for all their pay TV services. Sixty-two percent of respondents said they wanted premium TV delivered by their pay TV operator or an affiliated service. This should be reassuring to pay TV companies investing in their own Netflix alternatives, such as Dish, Viacom, Verizon and Comcast. Of pay TV subscribers, only 20 percent said they would cancel their services if their favorite shows were available online.
But don't expect the costs of Netflix, Hulu and other services to stay stagnant. They, too, have to deal with rising licensing fees. In fact, a report from Convergence Consulting Group forecasts lower subscription numbers for streaming services
throughout 2012 and 2013. (Case in point: When Netflix was faced with higher streaming rights in 2011, from $1.1 billion the year before to $3.9 billion, monthly subscription prices went from $9.99 a month to $15.98 for both online streaming and DVD rental by mail.)