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Pay TV - US - October 2012

“The specter of cord-cutting is omnipresent. Whenever churn turns up a few basis points, mainstream media float articles about the death of pay TV services. There are legitimate long-term concerns related to cord-cutting, but just as many might stem from the launch of branded smart TVs in 2012.”

– Billy Hulkower, Senior Technology Analyst

Some questions answered in this report include:

  • When will cord-cutting happen?
  • What can the industry due to avoid cord-cutting?
  • Is it really possible to police the internet?
  • How can individual pay TV brands protect themselves?
  • Why is DVR service at risk?

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer data
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                      • The market
                        • Sales growing now, but stagnation expected ahead
                          • Figure 1: Fan chart forecast of U.S. revenues of pay TV providers, at current prices, 2007-17
                        • TV mature, internet shows room for growth
                          • Comcast leads across service sectors
                              • Figure 2: Video subscriptions, by company, Q1 2011 vs. Q1 2012
                            • Telcos to carry market growth
                              • Figure 3: U.S. revenues of pay TV providers, segmented by type, 2010-12
                            • Market factors
                              • Mobile and fixed-point broadband central to future bundles
                                • Increasing concern about costs collides with easy access to online content
                                  • Figure 4: Reasons for not subscribing among those who cancelled service in past year, May 2012
                                  • Figure 5: Factors in carrier selection, May 2012
                                • Switchers primarily motivated by lower prices
                                  • Figure 6: Reasons for wanting to switch pay TV service, by age, May 2012
                                • The consumer
                                  • High-speed internet most desired feature of service
                                    • Figure 7: Interest in pay TV features, by age, May 2012
                                  • In search of higher ARPU: Premium channels, DVR, and VOD on the rise
                                    • What we think
                                    • Issues in the Market

                                        • When will cord-cutting happen?
                                          • What can the industry due to avoid cord-cutting?
                                            • Is it really possible to police the internet?
                                              • How can individual pay TV brands protect themselves?
                                                • Why is DVR service at risk?
                                                • Trend Application

                                                    • Experience is All
                                                      • Figure 8: Reasons for wanting to switch service, by age, May 2012
                                                    • Make it Mine
                                                      • Figure 9: Interest in selecting commercials, by age, May 2012
                                                      • Figure 10: Interest in selecting commercials, by household income, May 2012
                                                    • 2015 trends
                                                      • Brand Intervention
                                                      • Insights and Opportunities

                                                          • Segmentation based on interest in a la carte features
                                                            • Catching up with premium TV series
                                                              • Multicultural market still blossoming
                                                                • Following cellular to prepaid service
                                                                  • Proprietary reality programming
                                                                    • Back to the future with voice-based customer service
                                                                    • Market Size and Forecast

                                                                      • Key points
                                                                        • Near-term growth, long-term stagnation
                                                                          • Sales and forecast of pay TV providers
                                                                            • Figure 11: Pay TV sales from video subscriptions, at current prices, 2007-17
                                                                            • Figure 12: Pay TV sales from video subscriptions, at inflation-adjusted prices, 2007-17
                                                                          • Fan chart forecast
                                                                              • Figure 13: Fan chart forecast of pay TV sales from video subscriptions, at current prices, 2007-17
                                                                          • Market Drivers

                                                                              • Key points
                                                                                • Faster internet
                                                                                  • Figure 14: Interest in pay TV features, May 2012
                                                                                  • Figure 15: Interest in pay TV features, by age, May 2012
                                                                                  • Figure 16: Interest in pay TV features, by household income, May 2012
                                                                                • Price primary driver for switching service
                                                                                  • Figure 17: Reasons for wanting to switch pay TV service, by age, May 2012
                                                                                  • Figure 18: Reasons for wanting to switch pay TV service, by reasons for wanting to switch pay TV service, May 2012
                                                                              • Competitive Context

                                                                                • Key points
                                                                                  • OTT, over-the-air, stand-in for those who can’t afford cable
                                                                                    • Figure 19: Reasons for not subscribing to pay TV among those who cancelled service in past year, May 2012
                                                                                    • Figure 20: Reasons for not subscribing to pay TV, by age, May 2012
                                                                                  • Online video
                                                                                    • Figure 21: Ownership and intent to purchase PCs, tablets, and cellphones for use with televisions, August 2012
                                                                                    • Figure 22: Connecting laptops and tablets to TVs, by age, June 2012
                                                                                  • Limited differentiation leads to substantial promotion
                                                                                    • Figure 23: Factors in pay TV carrier selection, May 2012
                                                                                  • Middle-income, middle-age reach for promotions
                                                                                    • Figure 24: Factors in pay TV carrier selection, by age, May 2012
                                                                                    • Figure 25: Factors in pay TV carrier selection, by household income, May 2012
                                                                                • Segment Performance

                                                                                  • Key points
                                                                                    • Long, slow decline for cable continues
                                                                                      • Figure 26: Pay TV sales of video subscriptions, segmented by type, 2010-12
                                                                                      • Figure 27: Pay TV sales of video subscriptions, by segment, 2007-17
                                                                                    • Rising ARPU may no longer keep cable sales humming
                                                                                      • Figure 28: Pay TV sales of video subscriptions from cable companies, at current prices, 2007-17
                                                                                      • Figure 29: Fan chart forecast of pay TV sales of video subscriptions from cable companies, at current prices, 2007-17
                                                                                      • Figure 30: Cable subscribers for video, internet, and home phone, 2007-11
                                                                                    • 2012 possible peak for satellite sales
                                                                                      • Figure 31: Pay TV sales of video subscriptions from satellite companies, at current prices, 2007-17
                                                                                      • Figure 32: Fan chart forecast of pay TV sales of video subscriptions from satellite companies, at current prices, 2007-17
                                                                                    • Telcos on the rise
                                                                                      • Figure 33: Pay TV sales of video subscriptions from telcos, at current prices, 2007-17
                                                                                      • Figure 34: Pay TV sales of video subscriptions from telcos at current prices, 2007-17
                                                                                  • Leading Companies

                                                                                    • Key points
                                                                                      • Subscribership
                                                                                        • Figure 35: Video subscriptions, by segment and company, Q1 2011 vs. Q1 2012
                                                                                      • Brands gaining share offer promotions, not the lowest price
                                                                                        • Figure 36: Attitudes to pricing, promotion, and commoditization, by current service provider, May 2012
                                                                                      • Telcos seen as providing fastest internet
                                                                                        • Figure 37: Have or would like to have “fastest home internet,” by current service provider, May 2012
                                                                                      • One in four wants cellphone and TV service from same provider
                                                                                        • Figure 38: Have or would like to have “cellphone service from same company as TV service,” by current service provider, May 2012
                                                                                      • Share gainers perceived as carrying best in sports
                                                                                        • Figure 39: Have or would like to have “the most sports programming” and “most foreign language channels”, by current service provider, May 2012
                                                                                      • Share gainers perceived as providing remote DVR usage
                                                                                        • Figure 40: Have or would like to have select DVR functionality, by current service provider, May 2012
                                                                                        • Figure 41: Have or would like to have VOD and TV based online content, by current service provider, May 2012
                                                                                      • Pricing, programming, and bundling
                                                                                        • Comcast Xfinity
                                                                                          • DIRECTV
                                                                                            • DISH
                                                                                              • TWC
                                                                                                • AT&T
                                                                                                  • Figure 42: Pricing and speed for AT&T internet service, October 2012
                                                                                                • Verizon
                                                                                                  • Anywhere and anytime programming: DVR and VOD service by carrier
                                                                                                    • Comcast Xfinity
                                                                                                      • DIRECTV
                                                                                                        • DISH
                                                                                                          • TWC
                                                                                                            • Verizon
                                                                                                              • AT&T
                                                                                                              • Innovation and Innovators

                                                                                                                • DISH automates commercial hopping
                                                                                                                  • Aereo provides alternative to pay TV service
                                                                                                                    • FiOS, DIRECTV revamp UIs
                                                                                                                      • Partnerships with home video services
                                                                                                                        • DISH turns Blockbuster in to service for DISH subscribers only
                                                                                                                          • Figure 43: Dish network, “Blockbuster Movie Pass” internet ad, 2012
                                                                                                                        • Verizon/Redbox create Redbox Instant
                                                                                                                          • Netflix anyone?
                                                                                                                            • Customer service: Innovations or cost-cuts?
                                                                                                                            • Marketing Strategies

                                                                                                                              • Key points
                                                                                                                                • Overview
                                                                                                                                  • Selling bundles
                                                                                                                                    • Verizon FiOS pitches fiber optic
                                                                                                                                      • Figure 44: Verizon “FiOS TV and Net” television ad, 2012
                                                                                                                                    • AT&T gets accepted to Julliard
                                                                                                                                      • Figure 45: AT&T U-verse “Movers $15/$15” television ad, 2012
                                                                                                                                    • Century Link provides three-year guarantee
                                                                                                                                      • Figure 46: Century link “no regrets” television ad, 2012
                                                                                                                                    • Promoting individual features
                                                                                                                                      • Xfinity hawks VOD
                                                                                                                                        • Figure 47: Comcast Cable/XFinity On Demand, “Bridesmaids now On Demand” television ad, 2012
                                                                                                                                        • Figure 48: Comcast Cable/XFinity On Demand, “American Reunion on XFinity On Demand” banner ad, 2012
                                                                                                                                      • Remote home automation through Verizon
                                                                                                                                        • Figure 49: Verizon “Hectic” television ad, 2012
                                                                                                                                      • Blockbuster at home part of great Dish value
                                                                                                                                        • Figure 50: Dish “rate hikes” television ad, 2012
                                                                                                                                    • Subscription Status

                                                                                                                                      • Key points
                                                                                                                                        • Mobile broadband on the rise
                                                                                                                                          • Figure 51: Subscription to pay TV, home phone, and internet service, May 2012
                                                                                                                                          • Figure 52: Household subscribes to pay TV, by age, August 2011-March 2012
                                                                                                                                        • Cord-cutting still a phantom menace
                                                                                                                                          • Figure 53: Subscription to pay TV, home phone, and internet, by age, May 2012
                                                                                                                                        • TV mature, internet shows room for growth
                                                                                                                                          • Figure 54: Subscription to pay TV and home phone, by household income, May 2012
                                                                                                                                          • Figure 55: Subscription to home internet and mobile broadband, by household income, May 2012
                                                                                                                                        • Future plans for current services
                                                                                                                                          • Majority sufficiently satisfied to stay put
                                                                                                                                            • Figure 56: Future plans for current services, May 2012
                                                                                                                                          • Most age and income groups carry similar levels of interest in switching service
                                                                                                                                            • Figure 57: Potential switchers for pay TV, home phone, home internet and wireless internet services, by age, May 2012
                                                                                                                                            • Figure 58: Potential switchers for pay TV, home phone, home internet and wireless internet, by household income, May 2012
                                                                                                                                          • Current service provider: Comcast leads in home and mobile internet
                                                                                                                                            • Figure 59: Service providers used for pay TV, home phone, home internet and wireless internet, May 2012
                                                                                                                                            • Figure 60: Service providers used for pay TV, home phone, home internet and wireless internet, by household income, May 2012
                                                                                                                                          • Brands under consideration for change of service
                                                                                                                                            • Figure 61: Preferred pay (cable) TV service provider among potential switchers, by age, May 2012
                                                                                                                                        • Bundling

                                                                                                                                          • Key points
                                                                                                                                            • Bundling on the rise
                                                                                                                                              • Figure 62: Penetration of bundled home communication services, July 2008-March 2012
                                                                                                                                              • Figure 63: Penetration of bundled home communication services, by household income, August 2011-March 2012
                                                                                                                                              • Figure 64: Type of bundle subscription, double and triple plays, by age, May 2012
                                                                                                                                              • Figure 65: Type of bundle subscription, double and triple plays, by household income, May 2012
                                                                                                                                          • Premium Channels, DVR, VOD, and PPV

                                                                                                                                            • Key points
                                                                                                                                              • Premium channels
                                                                                                                                                • Figure 66: Incidence of subscribing to the main premium movie channels, July 2008-March 2012
                                                                                                                                                • Figure 67: Incidence of subscribing to the main premium movie channels, by age, August 2011-March 2012
                                                                                                                                                • Figure 68: Incidence of subscribing to the main premium movie channels, by household income, August 2011-March 2012
                                                                                                                                                • Figure 69: Incidence of subscribing to the main premium movie channels, by number of people in household, August 2011-March 2012
                                                                                                                                              • The acronyms: DVR, VOD, PPV
                                                                                                                                                • Figure 70: DVR, VOD, and PPV penetration, July 2008-March 2012
                                                                                                                                                • Figure 71: DVR, VOD, and PPV penetration, by age, August 2011-March 2012
                                                                                                                                                • Figure 72: DVR, VOD, and PPV penetration, by household income, August 2011-March 2012
                                                                                                                                                • Figure 73: Type of DVR owned, by household income, August 2011-March 2012
                                                                                                                                            • Impact of Race and Hispanic Origin

                                                                                                                                              • Key points
                                                                                                                                                • Multicultural groups last frontier
                                                                                                                                                  • Figure 74: Subscription status, by race and Hispanic origin, August 2011-March 2012
                                                                                                                                                  • Figure 75: Penetration of bundled services, by language spoken in home, August 2011-March 2012
                                                                                                                                                • Possible gains in increasing DVR and premium channel subscriptions
                                                                                                                                                  • Figure 76: DVR penetration, by race and Hispanic origin, August 2011-March 2012
                                                                                                                                                  • Figure 77: DVR penetration, by language spoken in home, August 2011-March 2012
                                                                                                                                                  • Figure 78: Incidence of subscribing to the main premium movie channels, by race and Hispanic origin, August 2011-March 2012
                                                                                                                                              • Appendix—Other Useful Consumer Tables

                                                                                                                                                • Brands under consideration for switching service
                                                                                                                                                  • Figure 79: Preferred provider, by potential switchers/plan acquirers, May 2012
                                                                                                                                                  • Figure 80: Preferred provider among potential switchers/plan acquirers, by household income, May 2012
                                                                                                                                                • Digital cable subscription
                                                                                                                                                  • Figure 81: Access to digital cable, household income, August 2011-March 2012
                                                                                                                                                • Reason for not subscribing
                                                                                                                                                  • Figure 82: Reasons for not having Pay TV, by gender, May 2012
                                                                                                                                                • Spend on landline
                                                                                                                                                  • Figure 83: Average monthly spend on landline, by household size, August 2011-March 2012
                                                                                                                                                  • Figure 84: Average monthly spend on landline, by marital status and presence of children in household, August 2011-March 2012
                                                                                                                                                • Reason for changing service
                                                                                                                                                  • Figure 85: Reasons for wanting to switch pay TV service, by household income, May 2012
                                                                                                                                                • Subscription penetration in offline sample
                                                                                                                                                  • Figure 86: Subscribes to pay TV, by household income, August 2011-March 2012
                                                                                                                                              • Appendix—Additional Tables on PPV/VOD

                                                                                                                                                  • Figure 87: Types of VOD programs seen in past 12 months, July 2008-March 2012
                                                                                                                                                  • Figure 88: Types of VOD programs seen in past 12 months, by age, August 2011-March 2012
                                                                                                                                                  • Figure 89: Types of VOD programs seen in past 12 months, by household income, August 2011-March 2012
                                                                                                                                                  • Figure 90: Types of PPV programs seen in past 12 months, by household income, August 2011-March 2012
                                                                                                                                                  • Figure 91: Number of VOD programs seen in past 3 months, by age, August 2011-March 2012
                                                                                                                                                  • Figure 92: Number of VOD programs seen in past three months, by household income, August 2011-March 2012
                                                                                                                                                  • Figure 93: Number of PPV programs seen in past 12 months, July 2009-March 2012
                                                                                                                                              • Appendix—Additional Tables by Race/Hispanic Origin

                                                                                                                                                  • Figure 94: Service provider, by race and Hispanic origin, August 2011-March 2012
                                                                                                                                                  • Figure 95: Number of VOD programs seen in past three months, by race and Hispanic origin, August 2011-March 2012
                                                                                                                                                  • Figure 96: Type of DVR owned, by race/Hispanic origin, August 2011-March 2012
                                                                                                                                              • Appendix—Trade Associations

                                                                                                                                                Companies Covered

                                                                                                                                                • Advanced Television Systems Committee
                                                                                                                                                • AT&T Inc.
                                                                                                                                                • Cablevision Systems Corporation
                                                                                                                                                • Comcast Corporation
                                                                                                                                                • Discovery Channel
                                                                                                                                                • Dish Network
                                                                                                                                                • ESPN, Inc.
                                                                                                                                                • FOX Broadcasting Company
                                                                                                                                                • Google, Inc.
                                                                                                                                                • McAfee, Inc.
                                                                                                                                                • MTV Networks
                                                                                                                                                • National Cable Television Association (NCTA)
                                                                                                                                                • Nickelodeon Networks
                                                                                                                                                • Satellite Broadcasting Communications Association
                                                                                                                                                • Satellite Industry Association
                                                                                                                                                • Starz Entertainment Group LLC
                                                                                                                                                • The DIRECTV Group Inc.
                                                                                                                                                • The National Cable and Telecommunications Association
                                                                                                                                                • Time Warner Inc.
                                                                                                                                                • U.S. Bureau of Labor Statistics
                                                                                                                                                • Verizon Communications Inc.
                                                                                                                                                • YouTube, Inc.

                                                                                                                                                Pay TV - US - October 2012

                                                                                                                                                £3,199.84 (Excl.Tax)