Subscription TV – Advantages & Disadvantages of Premium TV
What is subscription TV?
Subscription TV, or simply ‘pay television’, is the transmission of premium content via a subscription-based model. In essence, customers pay a recurring amount (often a monthly or annual rate) for the right to watch content that cannot be accessed free of charge.
Subscription TV services are most commonly focused on sports, films and more general programming like reality TV shows. Sometimes, it refers to a single TV channel (think HBO), and other times it can mean a bundle of extra channels (Sky in the UK). In the US, subscription TV was popularised through attractive cable television packages that gave customers access to premium content, a landmark development in consumer viewing habits through the early 2000s.
Subscription TV has always been sold on the premise of exclusivity and a refreshing ad-free environment for consumers. In recent years, interruptive advertising has become much more challenging to execute for traditional networks and platforms as consumers acquaint themselves with ad-free digital video platforms like Netflix and Disney+.
So where does subscription and pay TV currently stand in the eyes of both consumers and broadcasters? Is the so-called ‘Golden Age of Television’ coming to an end? We’ll weigh up the benefits and drawbacks and arrive at a poignant, yet slightly ambiguous, conclusion.
Benefits of subscription TV
1: Guaranteed Income
If the Coronavirus pandemic hasn’t already had enough of an impact on TV production schedules and working environments, it has also proved that there is fragility in the TV advertising landscape. As advertising revenues dwindled throughout 2020, many broadcasters looked towards OTT and digital platforms for alternative revenue models. Subscription TV is unique in the sense that it provides guaranteed income from subscribers on a monthly or annual basis. Of course, these subscribers can disappear as quickly as they appeared – so it’s important for pay TV providers to maintain the balance between quality, quantity and pricing of their programming and packages.
2: Creative Freedom
More often than not, Subscription TV packages and channels focus on a particular type of content. Whether it’s sports, action, drama, reality TV or comedy, subscribers are likely to be loyal and deeply connected to premium, genre-specific content. In turn, this can give broadcasters and content producers some much-needed creative freedom within the realms of the genre/s. This can lead to the creation of groundbreaking, viral documentaries, films and TV shows. For example, HBO’s Game of Thrones was a huge hit for the network and the fantasy drama genre, setting new viewership records in its last season. Even if your viewership doesn’t quite match Game of Thrones, smaller audience bases can be incredibly loyal and support unique productions through other means, like merchandise and crowdfunding.
3: Service Quality
Pay TV providers are perceived to have higher service quality – fewer outages, dedicated customer service and a higher quality level of content. Pay TV infrastructure is tried and tested, consistently backed by billions of dollars of recurring revenue from satisfied consumers. Of course, these paying consumers come to expect a certain level of service quality from pay TV providers, and one big outage or mishap can be the difference between a loyal customer and a lost subscriber. Most recently, major Virgin outages in the UK caused remote workers to lose access to both internet and pay TV packages, fueling over 41,000 complaints. When done well, enhanced service quality is a unique selling point for pay TV that differentiates itself from the alternatives.
Drawbacks of subscription TV
1: Declining Subscriber Revenues
It’s no secret that the subscription television and pay TV train has been losing speed as of late. As consumers move to on-demand OTT and digital video content from the likes of Amazon Prime Video and Netflix, cable TV packages and premium channels have been losing influence in households across the world, and especially in the US. As of 2020, the overall penetration of pay TV in US households dropped to 60%, which is the lowest number since 1994. Of course, economic hardship as a result of COVID-19 takes part of the blame for this mass cord-cutting. But, some speculate that the pay TV model is dwindling regardless, overshadowed by the current boom of OTT and on-demand platforms.
2: OTT and Digital Video
The threat that on-demand video platforms pose for pay TV is justifiably big enough to have its own section here. Once considered a marketing and sales ally by subscription TV networks (e.g, Netflix’s championing of Breaking Bad led its final season on AMC to be a smash hit), those same on-demand platforms began to tempt subscribers away with huge content libraries, ease of access and attractive monthly price points. So much so, that most people now immediately think of Netflix when you mention Breaking Bad. There are a number of reasons why pay TV faces a steady decline in the face of OTT and digital video, but perhaps most pertinent is the accessibility. Firing up your laptop or phone with a standard internet connection and a Netflix subscription can now give you access to premium content once reserved for the most exclusive of cable TV packages. Expensive set-up fees and lengthy contracts only serve to alienate and confuse customers.
3: Fixed Term Contracts
As the name suggests, subscription TV services require viewers to… well, subscribe. Subscription contracts are usually in the form of a fixed term for 12, 18 or even 24 months. This leaves consumers locked into seemingly never-ending payment plans, regardless of a change in circumstances or a change of heart. Additionally, providers like to push bundle subscriptions where consumers end up paying for broadband and phone lines alongside their TV subscription, despite cheaper separates being available. For the most part, you get your money’s worth with network-based subscription TV – the volume of available channels is hard to match! But with well over 1000 channels available with a Sky TV subscription, and the fact that a large portion of consumers now supplement their viewer habits with online OTT platforms, it’s highly unlikely that the average consumer is taking advantage of all of that content. Ultimately, expensive fixed-term contracts coupled with an overload of content leaves subscription TV subscribers yearning for more flexibility.
Subscription television is still a force to be reckoned with. Chances are, it always will be (to an extent). Whilst adoption and penetration in more mature areas like the US is gradually waining, pay TV finds itself thriving in other parts of the world. In Asia, pay TV subscription numbers are expected to hit 630 million in total by 2026 – representing fantastic growth potential for broadcasters and platforms. We’re not so sure what pay TV might look like globally in 2026, but we’re excited to find out.
For broadcasters, it’s never enough to just keep up with technological advancements and trends. At PlayBox Technology, we place a huge emphasis on keeping ahead of trends in the broadcasting industry. Our data-driven approach helps us to provide unique solutions for our ever-expanding portfolio of broadcasters, who are always on the lookout for the best playout solutions and cloud playout solutions to power their workflows. Looking to start broadcasting with PlayBox? Book a free demo or get in touch.