The average station’s monthly retransmission fee will rise to $1.53 by 2018, an amount surpassed by only five pay-TV networks: Walt Disney Co.’s (NYSE: DIS) ESPN sports network charges $8.80 a month and is the highest-cost station by a wide margin; TNT, owned by Time Warner Inc. (NYSE: TWX), charges $2.16 a month; Fox News ($1.67 a month) and Fox Sports 1 ($1.57 a month) are owned by Twenty-First Century Fox Inc. (NASDAQ: FOXA); and the Disney Channel ($1.56 a month).
nScreenMedia has analyzed what the changes mean for a subscriber to DirecTV (NASDAQ: DTV). DirecTV’s average revenue per user (ARPU) in 2014 was $107 a month. Under the conditions spelled out by nScreenMedia, that total rises to more than $162 a month in 2021.
For a family with a current household income at the U.S. median of $52,750, a pay-TV subscription in 2014 claimed about 2.14% of the family’s income. Median family income is projected to rise to $56,900 by 2021, and that family will pay 3.35% of its income for a cable or satellite subscription.
In 2014, programming costs at DirecTV represented 47.5% of revenues. All things equal, by 2021 DirecTV will be paying 57.2% of revenues for programming. Those costs will be passed through to subscribers, who will have to decide if it is worth the money. The answer to that question will determine the fate of the pay-TV business.
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