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‘Cord Nevers’ threat to pay-TV

November 28, 2012 09.56 Europe/London By Robert Briel

13% of broadband subscribers in the US, some 11 million households, do not subscribe to cable-like pay-TV services, according to research from TDG.

“According to our tracking research, the percent of broadband households doing without pay-TV has increased from 9.5% in late 2010, to 11.2% in late 2011, to 12.5% today,” said Michael Greeson, TDG founding partner and director of research, in a statement.

“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.”

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.

Cord Cutters, for example, are a bit older, enjoy 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.

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.”

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Related

Filed Under: Newsline, OTT, Research Tagged With: Cordcutters, Hulu, Netflix, pay TV, The Diffusion Group, US Edited: 28 November 2012 09:56

About Robert Briel

Arnhem-based Robert covers the Benelux, France, Germany, Austria and Switzerland as well as IPTV, web TV, connected TV and OTT. Email Robert at rbriel@broadbandtvnews.com.

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