Pay TV Revenue is Dropping: Root Causes and Solutions

Kirstin White | Tue Jan 09 2024 | Industry insights


People’s consumption habits are evolving quickly, and so is the media and entertainment industry.

While Pay TV used to dominate as the preferred content consumption mode at one time, OTT is on its way to disrupting the status quo. After all, it offers an excellent mix of choice coupled with value.

Has Pay TV become irrelevant?

Short answer - No. Pay TV is still the leading mainstream video distribution mode worldwide today. According to research, Global Pay TV subscriber numbers are predicted to steady at just under one billion by 2025. In other words, it may not grow but provides significant revenue to the industry.

So, at this point, it is critical for Pay TV broadcasters to understand how to delineate what’s causing churn. This information is useful to mitigate it, to ensure healthy acquisition, retention, and stable profits. It’s simple math - if subscribers move out of the fold, it impacts ARPU and, in turn, shrinks profitability.

What is ARPU? And why does it matter for Pay TV?

ARPU (Average Revenue per User) is a key performance indicator in the Pay TV industry. Simply put, it's the average amount a customer pays for their Pay TV subscription.

It is a strong indicator of brand loyalty and allows you to gauge customer satisfaction. Always remember: If your existing customers stay with you for longer and pay for your services, they will contribute positively to your bottom line.

On the other hand, if they keep churning, you’ll have a leaky profit bucket.

In other words, you’d have to keep on spending on acquisition to maintain the same revenue levels.

Takeaway: Higher ARPU leads to higher Customer Lifetime Value and increased profits.


A 27% drop in Pay TV subscribers between 2014 and 2024

Even though subscriber numbers are steady, global Pay TV revenue growth is dropping at a steep pace.

If it peaked in 2016, it has lately been displaying a declining trend year-on-year.

  • According to a research study cited in a Digital TV Research article, increasing cord-cutting will likely result in Pay TV households declining to 76.7 million by 2024. This estimate represents what will be the lowest penetration in a decade and a sharp 27% drop from 2014. In the same vein, Statista estimates that by 2028, worldwide pay-TV revenue will have fallen by another 26 million dollars.
  • Many traditional pay TV companies are now transitioning to streaming and rebranding. However, it's vital to note this is also a congested market, where North American consumers have over 300 DTC streaming choices.

What causes this overall declining trend for Pay TV?

If there are many factors to consider, we can isolate 3.

  1. Consumers find better value and wider content options with OTT
  2. Subscription fatigue from paying for multiple services
  3. Shrinking expense budgets of consumers amidst economic uncertainties

Now, it’s fortunately not a fatality, for Pay TV providers have options to turn the boat around.

Using Data Effectively for Next-Level Subscriber Retention


What can Pay TV services do to fight churn and grow ARPU?

There are several strategic directions that Pay TV and/or operators can opt for to address the current market situation and emerge resilient.

Invest to acquire benefits that come with the OTT model

If you’re an operator with the capacity to invest, leaping into OTT can help you get control over your long-term content monetization.

  • Consolidate the customer base: You can converge TV, broadband, voice, and wireless services. Doing so can help offer better value to your audience through compelling bundled offers with OTT subscriptions and, in turn, reduce churn probability.
  • Partner with OTT players: By partnering with OTT services and bundling your subscription fee with other services, you can provide additional value, which will likely help reduce subscriber churn. Example: Swisscom is launching a combined pay TV and streaming box based on Android TV and has signed up Disney+ as a new streaming partner to coincide with the launch of a new ‘super package’ offering a range of streaming products.
  • Plan acquisitions to reduce time to market: Buying up-and-coming or established players in the market can also enable scaling up efficiently while reducing the time to market. For example, you can take inspiration from Sinclair Broadcast Group’s strategic acquisition of Tennis Channel to chalk out your next growth phase.
  • Invest in or partner with local content producers: This can create opportunities to tap into the deepest layers of demography by offering local or regional content. It is for this reason that Netflix’s investment in the Asia-Pacific region is expected to reach $1.9 billion in 2023. The move is expected to deliver material gains for the streaming service in India, Indonesia, the Philippines, and Thailand.

Identify and pay attention to at-risk subscribers

Another significant aspect of addressing revenue decline risks is understanding why subscribers are churning, especially since subscriber churn is always multi-causal and can come from various reasons, such as content quality and catalog, pricing, or brand.

Therefore, a good idea is to dig deeper into your platform analytics, identify trends, and assess customer preferences that are working against you. The next step is utilizing this information to provide more personalized service offerings to win loyalty.

As a broadcaster, customer loyalty is your prime influencer toward high subscriber retention and, in turn, high LTV and profitability.

Now, loyalty is not just based on content but also on aspects like community and fan experiences. Therefore, you must work towards creating a stickier subscriber experience.

Offer coupons and discounts

Customers across all industries tend to be pretty responsive to discounts. Entertainment is not different.

Therefore, utilizing promotional campaigns to advertise discounts and offer free service trials helps immensely to gain new customers and retain existing ones. Some ways include providing discount coupons, subscription upgrades, or downgrade offers.

Did you know?

Cleeng’s Seasonal Subscriptions feature gives sports OTT teams the possibility to:

  • Acquire subscribers all season long with dynamic pricing
  • Beat seasonal churn by pausing subscriptions when a season ends and auto-renew them as the new season starts.

Run winback campaigns

Losing subscribers is not the end of the road, as history suggests paying customers are forgiving.

According to an Omdia study, at least 19 million US customers churned and then reactivated their service in 2022, representing over $500 million in monthly revenue.

Using Cleeng’s technical capabilities, CBC’s campaigns delivered an astonishing winback rate of 36%.

Read more on how CBC won churned subscribers back.

Invest in cloud-based customer service

Finally, it also helps to remember that today’s demanding consumers want proximity and helpful service at speed if they have any query, problem, or question.

Failure to do so hampers experience and results in them seeking alternatives. Thus, as a broadcaster, maintaining an edge in ensuring consistent, timely, and helpful responses is critical.

A cost-effective way to provide that lies in investing in tools and automation that allow customers to solve their service issues quickly and independently. Incorporating technology like AI into customer service creates the chance to improve the speed, ease of use, and accuracy of customer service.

Learn more about how to deliver unique support experiences for your subscribers.


Step up to keep churn under control and increase revenue

The Pay TV industry is at a challenging juncture with its growth rates declining.

What we know for sure is that Pay TV as we know it is bound to disappear, and key players in the market need to start introducing the right measures to prevent an inevitable fall.

Now, there are options.

Cleeng’s SRM™ suite helps media and entertainment broadcasters ace subscriber experience and retention. It is designed to take care of each step of the customer journey, from subscriber management and billing to customer service and churn management.

Itching to see more? Contact our experts for a demo.

Cleeng SRM Product