By Sunny Um WIRED Korea
Gone are the days when people have to put aside what they have been doing and rush to tune in to watch their favorite program from a terrestrial television station. All they have to do now is select a program at any time they want to watch it by using a video on demand (VOD) service on internet protocol-based television (IPTV).
VOD has been a goose that lays golden eggs for each of the three IPTV service providers – Olleh TV, LG Uplus and SK Broadband. During the past few years, they have seen their sales surge, thanks to their VOD services.
According to a report from the Korea Information Society Development Institute, their combined VOD sales marked a whopping 10 percent year-on-year increase, from $500 million in 2017 to $550 million in 2018.
Pricing is critical in keeping the VOD service as a cash cow, in particular when it comes to a series of episodes, as was attested to by 2015 raises in pay-per-view.
The VOD service has three types of payment – no payment for free-of-charge promotional contents, monthly subscriptions and pay-per-view. In 2015, the three IPTV service providers raised the pay-per-view rates, from 700 won to 1,000 won for a standard-definition episode and from 1,000 won to 1,500 won for a high-definition one, at the request of three major content providers – KBS, MBC and SBS, all of them being national terrestrial television networks.
The price increases came when some series of episodes were running and before some others started to run. A research on pricing was conducted on viewership the two different groups of episodes by a graduate student in pursuit of a Ph.D., who wanted to find out how viewers reacted to television series when the VOD prices were raised.
An increase in price lowers demand. That is an accepted economic principle, which should have worked on both groups of drama series. But it lowered demand for one group but did not for the other. That is what a team of researchers, led by Jo Jee-hyung, a Yonsei University graduate student on a Ph.D. program, found out.
The research team studied changes in viewership on two groups of drama series – 29 from terrestrial TV broadcasters that were running when the price increase came and 23 series that started airing after the price increase.
According to their findings made available last December, the number of viewers of the 29 drama series dropped 17.4 percent after the price increase. Those who stopped viewing might have reflected the sentiment of a Twitter user who wrote shortly after the price increase: “I would rather start a monthly subscription, instead of paying for each episode.”
With all other things being equal, a price increase made prior to the airing of a new series would lower the number of viewers under the law of supply and demand. According to the December report, that did not happen. The average number of viewers of the 23 drama series, whose airing started after the price increase, went up 15.4 percent when compared with the average number of viewers of 18 series that ended prior to the price increase.
What is behind the two different reactions? The report claims that viewers, who experience a price increase in the middle of a series, regard the series as one product and that they conceive of the price increase as the increase in price for the whole product. On the other hand, the report said, viewers are less sensitive to a price increase prior to the airing of a series because they regard it as a new product.
The results indicate that consumers react differently to the price change depending on how and when it is applied. “If it happened between two different episodes in one television series, consumers tend to react more sensitively as they perceive the series as a single product,” Jo’s team write in their research paper.
It said, “Consumers are less keen to a price increase if it is applied from the beginning of a television series because no change in price was made from one episode to another.”
How does a viewer rating affect the attitude when it is combined with a price increase for a comparison of viewer attitudes? There was no big difference in a decline of viewers among the series that had different viewer ratings. In other words, higher ratings did not translate to higher loyalties. Nor did episode-to-episode continuity in the storyline context have a much impact on viewership.
Jo says her team’s findings will be helpful to IPTV service providers when they make decisions with regard to pay-per-view pricing.