Note: An extended version of this analysis is available exclusively for VIP subscribers.
It’s no secret that pay TV is facing a mounting existential challenge.
A record 6.2 million subscribers canceled their service from the six publicly traded operators between Q3 2019 and Q2 2020 (the most recent 12-month period with figures available).
One of the key reasons for subscriber decline is the increasing cost of subscriptions, abetted by the erosion of value for the overall cable package as originals production shifts to streaming.
This has created what is a growing problem for pay TV. Despite millions fleeing cable each year, individual networks continue to increase the monthly carriage fees they charge MVPDs for access to their content, which is in turn passed along to consumers.
In an attempt to quantify how this threatens the future of the cable bundle, Variety Intelligence Platform conducted an analysis of two data sets.
Kagan, the media research group of S&P Global Market Intelligence, provided affiliate fee estimates for the top 20 most expensive basic cable networks in addition to the major broadcast networks’ retrans fees.
Adaptive consumer insights platform Wizer conducted an exclusive consumer study for VIP, with data from a question asking pay-TV subscribers which channels they regularly view being used in this analysis.
The results are that the most expensive basic cable channels are rarely viewed by a majority of subscribers. Of these networks, only FX is watched by more than 3 in 10 subs, with most seeing fewer than 1 in 5 viewing.
In an effort to highlight how much regular viewers would have to pay on an individual basis if media companies wanted to maintain their current revenues, VIP estimated the “true cost” per viewer, as well as the rate of increase this would see.
ESPN and sister college channels SEC Network and ACC Network come to an almost unfathomable amount, totaling $69.84 for the avid sports fan. The SEC and ACC networks, along with Fox’s BTN, are also the only networks to see what would be double-digit rates of increase versus current fees.
The house of cards of increasing cable costs is getting more and more unstable. With networks unwilling to stop raising prices or prioritizing content for streaming services, it will only be a matter of time before either viewers have to pay full price for what they view or the affiliate-fee-increase bubble pops.