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Cable Technology Feature Article

January 23, 2014

Are Consumers Cutting Back on Purchases of Premium Channels - or Not?

By Gary Kim, Contributing Editor

Are U.S. consumers substituting online streaming services such as Netflix for premium subscription video channels such as HBO, Showtime and Starz? The networks say they have grown their subscriber bases over the last year.

But a study by NPD Group (News - Alert) suggests subscriptions to HBO, Showtime, and other premium TV services have declined over the past two years, as Netflix and other subscription video-on-demand (SVOD) services have gained in popularity.

According to NPD Group, premium channel subscriptions declined six percent over the last two years, while households subscribing to Netflix and other streaming services grew about four percentage points.

But Showtime says it has added one million subscribers a year in six of the last seven years. HBO says it added 1.9 million subscribers in 2012 and it expects a similar result in 2013.

Starz claims it has added 1.2 million subscribers in the last 12 months, as well.

One might attribute the different conclusions to an NPD Group sample group that somehow is not fully reflective of total U.S. subscribers.

Also, it is possible that some groups of subscribers (cable TV, for example, are scaling back premium TV subscriptions, while other groups, such as telco TV subscribers actually are increasing their purchasing).

NPD Group says 32 percent of U.S. households subscribed to premium channels in August of 2013, while 27 percent of U.S. households bought an over the top streaming video service.

That particular set of figures does not shed any particular light on premium channel subscription trends, other than to suggest Netflix and other streaming services are, at the moment, functional premium channel substitutes, for at least some customers.

In 2013, SVOD made up 71 percent of all digital-video transactions, and it continued to grow faster than all other digital acquisition types, NPD argues.

Digital-video transactions represented 70 percent of all home-video transactions in 2013, defined as content purchases and individual paid rentals, but not including free on-demand movies and TV shows included with a pay TV subscription.

It seems clear enough that more people are buying Netflix and other similar services. What is not clear, at least for the moment, is whether those new subscriptions are cannibalizing premium services, or not. 

Edited by Alisen Downey

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