In the U.S., virtual Pay TV services (the Pay Lite, or ‘skinny bundle’ streaming services offered by established Pay TV operators online) raise over 2.5 times as much revenue per subscriber per channel carried than a traditional Pay TV platform. That is the dramatic finding from Ampere Analysis, which partly explains this phenomenon with the observation that all channels offered in streaming packages are strong brands.
Taking into account the higher relative income (on the basis of the average gross revenue per subscriber for each channel carried) and considerably lower subscriber acquisition costs for the streaming services, Ampere Analysis declares: “There is more money to go around in the skinny Pay TV bundle than in traditional U.S. Pay TV packages, making the switch to ‘virtual’ Pay TV potentially lucrative for channels.”
The conundrum for subscription channels is how to balance demands to join skinny bundles with support for their core business model, the analysis firm notes. Nevertheless, Guy Bisson, Research Director at Ampere Analysis, concludes: “For channels, the shift to streaming and the rise of vMSOs (virtual Multiple Systems Operators) looks like a potentially strong plus – providing they have strong enough brands to make the cut.”
Traditional U.S. Pay TV operators make an average of $0.23 per subscriber a month in gross revenue for each channel carried, with revenues per channel consistently falling within a range of $0.15 to $0.30, Ampere Analysis reveals. “By contrast, vMSOs make a healthier $0.59 per channel (per month, average) in their streaming packages.”
Bisson adds: “U.S. Pay TV operators have needed to balance carriage fees and revenue for a long time. However, with the increasing migration of Pay TV subscribers to OTT services, that balancing act is only set to become more precarious. Despite the fees they are charged to include U.S. networks in their streaming packages [which reportedly run to several dollars per channel] vMSOs have made a better job of reconciling the carriage fees versus revenues per channel equation.”
The company has measured revenues per channel carried across traditional U.S. Pay TV operators and estimates that those under most pressure from carriage fees are DISH, Verizon, DirecTV and Century Link. “These operators have a high number of channels and commensurate lower revenue per channel based on their current customer ARPU levels. In contrast, those operators with the highest income per channel and which look to be in a relatively strong position are cable operators Comcast, Charter, Suddenlink and CableOne,” the analyst firm says.