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Pay-TV refugees 13% of US broadband households

November 28, 2012

Although general video subscriptions remain flat to slightly negative, a growing number of broadband households are doing without pay-tv, according to new research from TDG.

The analyst firm finds that 13 per cent of broadband subscribers – some 11 million households – do not subscribe to cable-like pay-TV services. TDG’s latest report, PayTV Refugees: A Primary Profile of Cord Cutters and Cord Nevers, offers a detailed profile of this small but growing segment of home entertainment consumers.

“According to our tracking research, the percent of broadband households doing without pay-TV has increased from 9.5 per cent in late 2010, to 11.2 per cent in late 2011, to 12.5 per cent today,” notes Michael Greeson, TDG Founding Partner and Director of Research. “Though pay-TV operators rightly argue that OTT’s impact on basic video subscriptions has been negligible, when one focuses exclusively on broadband subscribers – those most likely to have access to OTT services – the numbers tell a different story, he advises.

TDG separates Pay-TV Refugees into two familiar segments: Cord Cutters (broadband users that once subscribed to pay-TV but no longer do) and Cord Nevers (broadband users that have never subscribed to pay-TV). Though they share obvious dispositions (they both subscribe to broadband but not pay-TV) these two segments exhibit radically different profiles. TDG describes Cord Cutters as “a bit older”, enjoying higher annual incomes, and are more likely to have children under 18 living in the home. Conversely, almost a third of Cord Nevers are between the ages of 18 and 24, more than half have annual incomes under $30,000, and only one-fifth have children under 18 living in the home.

While TDG expects the number of Pay-TV Refugees in both segments to increase over the next five years, it is Cord Nevers that comprise the most immediate challenge for pay-TV operators, it advises. The logic, notes Greeson, is fairly straightforward. Today’s young consumer is more technologically sophisticated than their predecessors, especially when it comes to entertainment. Coming of age in a world of net-connectable screens and online services like Netflix and Hulu, these pay-TV prospects are fully aware of the existence and costs of such services. They understand the benefits and limitations of the online alternatives.

“Imagine you were a 20-year old struggling to find a job (much less ‘the’ job), moving out on your own and for the first time faced with paying your own bills. Spending $80-$100 per month for a pay-TV service, though enjoyable, is more of a luxury than a necessity. And by combining free over-the-air broadcasts with a couple of $8 per month OTT subscriptions and free online video, they can easily create an imperfect but sufficient substitution solution. And many will,” he predicts.



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