American pay-television is in decline

IN THE PAST decade one American industry has lost 5% of its customers, suffered a 20% drop in consumption, but still managed to increase sales by 30%. Pay-TV, for that is the miraculous sector in question, achieved this by charging customers 50% more for the same old services. Until recently it remained a lucrative formula for most owners of distribution networks, like cable companies, and the media firms that supply them with programmes.

Now this cushy business is showing unprecedented signs of strain. In the first quarter of this year American satellite, cable and telecommunications companies lost 1.4m TV customers, the steepest decline on record, as Americans rejected overstuffed pay-TV packages costing as much as $100 a month.

Money for something

MoffettNathanson, a research firm, estimates that the drop was less severe—about 860,000 households—when counting “skinnier” pay-TV services sold over the internet. These include things like Hulu Live, backed by Disney and Comcast, and were introduced below cost. These boosted the overall number of pay-TV households but generated big losses for operators.

The first hints of losing customers to Netflix a few years ago drove a wave of consolidation, including AT&T’s purchase of Time Warner and Disney’s acquisition of much of Fox. Both are...



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