In the past, television was seen as recession proof. People would cut back on entertainment outside the home, but would continue taking their TV package as they hunkered down to see out the downturn.
That’s why it’s surprising that the news on the Pay TV front in North America isn’t better than it is. According to Bloomberg, the six largest publicly-traded U.S. cable and satellite TV providers combined lost about 580,000 customers in the second quarter, the biggest such decline in history.
As Craig Moffett, an analyst at Sanford C. Bernstein in New York noted: “Rising prices for Pay TV, coupled with growing availability of lower-cost alternatives, add to a toxic mix at a time when disposable income isn’t growing.”
Now it seems that smartphones have replaced the television as the must-have item, even in the harshest of economic climates. A recent Pew Internet & American Life Project report found that after only four years since the iPhone was launched, one-third of all American adults own a smartphone and that a quarter of these smartphone owners use the devices as their main way to get onto the Internet and consume content.
So if the old saying is true, and necessity is indeed “the mother of invention”, then now is the perfect time for Pay TV providers to consider innovative new business models to shore up their present subscriber base and attract new ones.
In particular, one area worth serious consideration on the part of cable and satellite TV providers is prepaid TV. This can range from basic, event-based vouchers to encourage new subscribers to a “create your own” prepay service, which offers both a choice of content, and control over spending to provide significant value for customers.
Indeed, there are already a number of prepaid TV models worth examining. In India, Airtel offers its customers flexibility through an à-la-carte channel selection, which enables subscribers to build their own prepaid packages based on the specific individual channels they want to watch, (as opposed to paying for dozens of channels they’ll never use). Another is “Platform N”, the Polish direct-to-home (DTH) Pay TV platform which launched a prepaid option. But as market strategy expert Dana Porter points out “If you believe this phenomenon is restricted to emerging markets and low ARPU segments – think again. We are seeing more players in mature markets trying to explore the prepaid segment.”