NEW YORK—The average household is paying nearly double in subscription costs to pay TV since 2000, representing an inflation-adjusted annual rate of 74 percent, according to Kagan.
When figuring in 2017 inflation adjusted dollars, legacy pay TV homes in 2000 were spending an average of $698.30 per year for multichannel service over telco, cable and satellite; by 2017, this figure had risen to $1,211.58, representing 3.3 percent CAGR. The real U.S. average income, in comparison, advance at a 0.3 percent CAGR, growing just 4.7 percent over the 17 year period, Kagan said.
The increases have not come without service enhancements, however, including a larger number of networks, and advanced services such as VOD, DVR services and improved user interfaces and resolution.
Kagan noted that multichannel revenue per subscriber “varies widely across the income spectrum.” In areas where the mean income was below $49,999, the multichannel penetration rate was 71.2 percent compared to a national average of approximately 74 percent as of Q4 2017. In areas where the average household incomes were more than $200K, penetration stood at nearly 83 percent, and in areas where average household incomes were between $50K and $100K, (the majority of households, at 73.5 percent of the total) penetration came in at 72.5 percent.
To add perspective on the impact that rising Pay-TV subscription rates have on household incomes, Kagan calculated U.S. multichannel purchasing power based on 2017 inflation-adjusted annual multichannel average revenue per user (ARPU) and average income figures, using 2000 as the base year. Based on this, Kagan developed an "affordability index" that illustrates the sharp decline in affordability, starting at 10 in 2000 and declining from then on, but relatively flat since 2012.
Kagan blamed “the eroding multichannel affordability” partly to the growing popularity of OTT services such as Amazon Prime, Hulu and Netflix, as well as the emergence of “skinny bundles” from DISH and ATT’s DirecTV.
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Tom has covered the broadcast technology market for the past 25 years, including three years handling member communications for the National Association of Broadcasters followed by a year as editor of Video Technology News and DTV Business executive newsletters for Phillips Publishing. In 1999 he launched digitalbroadcasting.com for internet B2B portal Verticalnet. He is also a charter member of the CTA's Academy of Digital TV Pioneers. Since 2001, he has been editor-in-chief of TV Tech (www.tvtech.com), the leading source of news and information on broadcast and related media technology and is a frequent contributor and moderator to the brand’s Tech Leadership events.