It is fair to say that television is undergoing significant change. Consumers can choose from an ever-growing wealth of content, and the ways this content can be consumed are constantly evolving. The success of BBC iPlayer and Netflix are just two examples that highlight how we no longer have to be sat down at a specific time and date to view our favorite programmes; TV ‘on-demand’ means we can be far more selective. However, not all parties are winners: the future of contract television is potentially at risk from such services.
Against a backdrop of falling television subscriptions , UK digital satellite TV service Sky is once again promoting a tried and tested method this spring: pay-per-view. It recently announced that it will offer a ‘day-pass’ allowing viewers to log-on for 24 hours to watch any match from its sports portfolio  at a cost of £9.99. The service will be available on ‘second screens’ such as PCs, laptops, tablets and certain Android phones. In an era where sport is so readily accessible, why is Sky doing this?
There are a number of apparent advantages in offering this service. While all sports will be available, football is likely to be the main motivator behind a purchase as demand for the Premier League remains exceptionally high (as emphasized by the new three-year television deal that starts from season 2013-2014 ). With the recession and attendances to football matches falling, more people are reliant on watching from their front room, thereby making an ad-hoc service a potential hit with viewers.
It’s a low-risk strategy. The price (£9.99) is significantly cheaper than attending any of the sporting events you can choose to watch. Research also shows that there are approximately 13 million UK homes reluctant to take on subscription television, which represents a large potential market that may be interested in the pay-per-view service . The move follows in the footsteps of a pay-as-you-go movie facility which Sky launched last summer, evidence that the corporation already has experience of rolling-out this type of product. In fact, this is very much old territory, given the boxing, wrestling and other pay-per-view events screened throughout its history.
Longer term implications
This development does raise questions about the sustainability of the long-term subscription offering. As mentioned, contract television is appearing vulnerable and this is likely to be the driver behind Sky offering the ‘day-pass’ service. With the increased freedom to watch TV on-demand, pay-per-view is a desirable option against a more expensive contract option. And in the context of a technology revolution and changing consumption habits, this may become a real issue. Television has traditionally been a ‘lean-back’ or passive experience, but in 2013 is showing signs of more a pro-active, ‘lean-forward’ one where viewers are more selective. This is aided by the use of ‘second screens’ and Smart TVs in developed markets, as discussed in the TV Edition of GfK’s TechTalk magazine .
It could also be said that pay-per-view is representative of the more short-term ‘instant’ experience viewers are currently seeking. The rise of online video companies Netflix and Lovefilm emphasizes this, with a relaxed, ‘cancel anytime’ service proving a successful alternative to contract options. Given the increase in consumer choice and the more pro-active viewing experience, it makes sense to move towards a model more in line with this.
So how far will it go? It has been predicted that when pay-per-view is fully developed , it is likely that we will be paying for each individual programme. While this hasn’t yet happened, there are interesting developments that indicate this might be a sign of things to come. For instance, Netflix has seen its new TV series (House of Cards) – which can only be viewed exclusively on its own website - become its most watched content . Inevitably, there are other aspects of the entertainment industry that are also pursuing such opportunities. A recent Rolling Stones gig in the US, New Jersey, is just one example of live music broadcast online, at a cost of US$40 . Indeed, theatre, film and music are areas that offer huge potential. In short, if an event or programme is popular enough, it may well be the next pay-per-view offering.
Sky is clearly conscious of responding to viewer demand, and this strategic move represents what is happening in a wider context of increased consumer choice and the success of no contract options. The network (along with newcomers BT) will pay the Premier League £3.018billion for live football rights over the next three seasons, and this facility will increase the potential customer base in order to justify this outlay. It remains to be seen how well the price is received and how many people purchase – and no doubt other networks will be closely monitoring this with a view to launching their own pay-per-view service.
Ultimately, entering your pin number may be seen as important as switching on your device and boiling the kettle – if it isn’t already.
3 MIN READ
3 MIN READ
Subscribe to GfK Insights