Operators charge too much for pay per view

Major cable operators are offering pay per view to their subscribers. In The Netherlands they charge 3 – 8 EUR per show. I always found this too expensive. It was an intuitive thing without any real data. In this article I try to make this real and answer the question: what does television cost?

In 2008 RTL NL had a revenue of 437 million EURO. This reveneu was made with three TV stations; RTL4, RTL5, RTL7 and RTL8. The most important television hours are from 18.00 until 24.00 which are 6 hours in total. In one year there are 365 days with 6 hours of television spread over 4 channels. In total 8760 hours to generate 437 million EURO. That is 49.885 EUR revenue per hour television for each channel.
Based on research done by the Stichting Kijkersonderzoek I calculated the average viewers for RTLs three television channels per evening for week 8 2010. I found the following figures:

1. RTL4 – 800.000 viewers
2. RTL5 – 234.000 viewers
3. RTL7 – 308.000 viewers
4. RTL8 – 115.000 viewers

On average evening RTL captures 1.458.000 viewers (between 18.00 and 24.00). This means they have to make 0.82 EUR revenue per viewer per evening. I calculated this by multiplying 49.885 EUR x 6 hours x 4 channels / total viewers = 0.82 EUR per viewer per evening. In 6 hours of television on average 6 shows are broadcasted. This means each shows costs only 0.18 EUR per show per viewer.

Now if I look at our local cable provider UPC they charge between 3 – 8 EUR per show with their pay per view offering.

Of course there is a difference in number of viewers per show. But even that cannot explain the 3000% price difference.

Most people I talk to find pay per view too expensive. They do not have a specific reason for it. I think they intuitively recognize that the price is not fair. When prompted about what they are prepared to pay they tell me figures between 0.50 EUR and 1 EUR. And this seems fair. Especially recognizing that the chance that viewers only tend to watch the hit shows and forget about less popular shows.

My conclusion is that Pay Per View will not get popular up until the producers and broadcasters understand that the price should be inline with the actual costs. In the end they should not care if I watch a show on one of their channels with commercial breaks or I pay to view it at my convenience without commercial breaks. Only advertisers should worry when they start loosing an advertising channel. On the other hand those Marketing boys and girls are creative enough to find new ways to advertise their products.