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Cable Technology Feature Article

April 05, 2011

Cord Cutting Accelerating or Not?

By Gary Kim, Contributing Editor

Though perhaps just 1.4 percent of consumers have "cut the cord" in the last two years, abandoning multichannel TV services, about 7 percent of current subscribers are considering canceling their service, according to a survey to be published in the May issue of Consumer Reports. But L.E.K. surveys recently found little actual evidence of increased cord cutting, though. To date, only two percent of L.E.K. survey respondents are cord cutting.  

A more serious issue facing cable and satellite providers is “cord trimming,” the term for consumers who keep – but reduce – their monthly cable or satellite TV services. L.E.K. found that 16 percent of consumers reported reducing their monthly pay TV bills during the past year. Those cord trimmers reduced their pay TV bills by an average of 25 percent.  

But media consumption seems to be changing in other areas. One trend is that early adopters of Apple (News - Alert) iPads and tablet devices of various types, including e-readers, are, as you might suspect, more likely to be "high consumers" compared to the rest of the population. 

Much the same pattern holds for other forms of media as well: tablet owners consume more of everything. Tablet owners report they watch 48 hours of TV a week, compared to 37 hours for non-tablet owners. Table owners listen to 11 hours of radio a week, compared to eight hours for non-tablet owners.

Tablet owners listen to 11 hours of music a week, compared to 6.6 hours for non-tablet owners. Tablet owners watch 10 hours worth of movies, compared to four hours for non-tablet owners. Tablet owners play 18 hours a week worth of games, compared to six hours for non-tablet owners. Tablet owners report consuming 14 hours worth of published material, compared to eight hours for non-tablet owners. 

Apple iPad and tablet owners are voracious consumers of media and are significantly outpacing individuals who do not own tablets, the study suggests. In fact, L.E.K. argues that online digital media consumption actually is declining for nontablet owners, while digital consumption is surging for tablet owners. Over the last 12 months, the study of 2,000 respondents suggests 19 percent of non-tablet owners say their consumption of online newspaper content has declined. Likewise, 20 percent of non-tablet owners reported that their online book consumption has decreased over the last year. Also, 20 percent of non-tablet owners reported that their consumption of digital magazines has declined as well, over the last 12 months. 

By way of contrast, 28 percent of tablet owners reported more consumption of online newspaper content, 30 percent reported higher e-book readership and 29 percent said they were consuming more online magazine content. 

You might wonder why digital consumption among tablet owners is so much higher than among non-tablet owners. The number-one reason, said L.E.K. researchers, is that tablet users prefer e-readers for viewing traditional print media on their devices. 

The second reason is the perceived lower price of e-versions of books, newspapers and magazines.

Overall, the study suggests that consumers prefer electronic and digital media over physical copies, and also prefer subscription models over a la carte purchasing. How much of that preference is due to the perceived value-price relationship, and how much is because a la carte modes sometimes are the only way to purchase some products, is not clear. Theater tickets, DVD purchases, video on demand, DVD rentals and video or music downloads traditionally are offered only as a la carte products. Netflix, though might provide evidence supporting the "users prefer subscriptions" hypothesis. 

Whether there is significantly more video cord cutting coming in the near future remains an open question. What seems less in doubt is that other media consumption patterns are changing. Consumers are shifting away from console games, concerts, gambling and cinema, the study suggests. Among the reasons are available leisure time. 

The explosion in new media causes consumers to be even more selective about how they spend their free time, despite the continued prevalence of “media multitasking.” This is the primary cause of drops in console games (revenues down eight percent per year 2008-2010).

There might also be growing resistance to price increases. Many entertainment sectors have increased prices faster than inflation, and L.E.K. is seeing growing evidence of a backlash. For example, 56 percent of consumers that L.E.K. surveyed cited high theater admission prices as the reason for fewer trips to the movies.

Also, the study suggests that subscription models are growing because they offer higher perceived value for money. It might still be unclear whether the video cord cutting behavior is growing. But it does seem clear that other changes in media consumption are occurring, many apparently driven by resistance to prices or limits on discretionary time. Tablet owners seem predisposed to higher consumption overall, and are driving a shift to new digital formats. 

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Janice McDuffee