Digital means many things in the world of television, but most importantly, digital means change: new technologies, platform innovation, and new markets for digital programming. In recent years, broadcasters have rationalized a transition to Pay TV business models as the logical outgrowth of high definition (HD) programming and the shift to digital broadcast signals. European Pay TV subscribers are seen as a limitless resource of monthly subscription revenues, fueling a growing marketplace for video programming. And yet the reality is quite different. Broadcasters have already shown up late to the party, and what remains is an opportunity to fight for an ever-smaller piece of the Pay TV pie. In order to survive the changes brought about by digital technologies, broadcasters will need to focus instead on delivering value through an increasingly complex delivery chain that includes Pay TV, consumer electronics and hybrid service providers.
In the Pay TV model, broadcasters have explained their involvement as an incremental increase in in monthly average revenue per user (ARPU) – often in the form of an additional € 1-3 per month for Pay TV service providers to collect. Increases of this magnitude can quickly add up, jeopardizing consumers’ collective willingness to pay for services, and ultimately impacting the nature of Pay TV programming packages. In a crowded media environment, the perceived marginal benefit of an additional channel is often far less than the incremental revenues broadcasters are seeking.
Furthermore, programming costs account for between 22% and 35% of Pay TV revenues, meaning that one euro for the broadcaster can easily translate into three euros for the consumer. At a time when Pay TV service providers are working to control their programming costs; broadcasters are trying to up their share in the venture. This is a recipe for disaster.
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