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Cable Technology Feature Article

April 19, 2011

Video Cord Cutting Remains Minimal, Except Among Younger Viewers

By Gary Kim, Contributing Editor

Nielsen data suggests  that the number of households dropping all linear video service in favor of online-only remains quite rare, except among younger viewers. Nielsen recently found that in households with people 25 years old or younger, 8.5 percent are cable-free, which is almost twice the national average. 

Younger people consider cable a “luxury item”– one that might be out of their budget right now, but would become an option once they grew older and could afford that extra $100 a month, Nielsen suggests. 

The big unknown is how those habits might change as younger users age, have higher incomes and no longer have to economize. We just don't know the answer to that question, yet, and we will need another decade or more before “economics” stops being a motivator of behavior for people who now decide they can live without cable TV. 

ESPN (News - Alert), likewise, says there remains little evidence of consumer abandonment of multichannel video service, especially where it comes to sports programming. 

Analyzing Nielsen data, ESPN argues that Just 18/100ths of U.S. households “cut the cord” between fourth quarter 2010 and first quarter 2011. “Cord cutters” are defined as as multichannel users with a high-speed Internet connection that have dropped their cable/telco/satellite subscriptions, but retain their broadband connection to watch television. The current rate of 0.18 percent is less than the 0.28 percent found in ESPN’s previous analysis of cord-cutting from third to fourth Quarter 2010.

The amount of “cord-cutters” – multichannel homes with a high-speed Internet connection that drop their cable/telco/satellite subscriptions, but retain their broadband connection to watch television – netted out to only 0.11 percent of the television population over the past three months, according to an extensive ESPN analysis of Nielsen’s national people meter sample. The ESPN study provides a methodology for measuring and tracking cord cutting in the future, while debunking several stereotypes about the demographics of cord cutters.

The earlier ESPN analysis of Nielsen data found that just 0.28 percent of homes in the Nielsen sample dropped multichannel service but kept their broadband Internet connections. This migration was offset by a group of broadcast-only households that became subscribers to multichannel TV and broadband over the same period. These “un-cutters” represented 0.17 percent of homes in the Nielsen sample, so the net loss between the groups was just 0.11 percent of all households. 

Additionally, people who were heavy or medium sports viewers showed zero cord cutting. Heavy and medium sports viewers account for 83 percent of sports viewing and 90 percent of viewing to ESPN, the company said.

The Cable & Telecommunications Association for Marketing argues that only 11 percent of the U.S. population currently watches “some TV shows and movies from the Internet on their TV sets.” The vast majority of these Internet TV viewers (84 percent) say that they are still watching the same amount of traditional TV as before and have no plans to cancel their current cable subscriptions. read more here.

At least in aggregate, the number of users who dropped service altogether was almost exactly balanced by the number of consumers that bought multichannel video for the first time, or decided to subscribe again after an absence. These “un-cutters” also represented 0.18 percent of homes in the Nielsen sample, so the net loss between the groups was zero, ESPN argues.

Of course, there is a difference between current or immediately-past behavior and behavior as it might exist in the future. Almost nobody, if anyone at all, actually believes there will be anything but growth for over-the-top viewing, over time.

From ESPN's viewpoint, heavy or medium sports viewers showed zero cord cutting. Heavy and medium sports viewers account for 77 percent of sports viewing and 87 percent of viewing to ESPN. That makes sense. Live sports is one area of programming virtually none of the over-the-top providers can offer. To the extent that live sports is a major reason for watching linear video, there is little ability to shift viewing to online formats. The same is likely true of live news and live events that are for all sorts of reasons available only on broadcast and linear outlets.

That noted, online viewing continues to grow. ComScore, meanwhile, said that 174 million U.S. Internet users watched online video content in March for an average of 14.8 hours per viewer. The total U.S. Internet audience engaged in more than 5.7 billion viewing sessions during the course of the month.

Nor is it yet entirely clear what the key value is for consumers. In an environment where television viewing continues to fragment, users seem to using much of their non-TV viewing, especially over-the-top as a substitute for digital video recorders. That is to say, they see online video as a “catch up” service that allows them to watch a program they have missed when it was shown on some linear TV service, according to a new Accenture (News - Alert) survey.

When it comes to choosing their favorite Internet broadband features, the largest number of respondents (40 percent) said “catch-up TV,” which enables them to watch content that they may have missed, provided the greatest value, Accenture said. Only 14 percent of respondents said the top feature was Web surfing on their televisions and only 11 percent desire interactive and social networking functionality on a TV. 

Those findings might surprise some, who have suggested that large numbers of consumers want advanced new interactive features on TVs. The survey actually indicates what people want is the ability to watch programs on their own schedule, which arguably has been a high driver of end user value for decades, with VCRs being an early indicator. 

The Accenture survey suggests that, by whatever means, viewers want to “watch what they want, when they want it,” a trend that has been clear for decades. The survey suggests high demand for the ability to watch content consumers may have missed, recorded up to a week or so in the past. 

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

Edited by Jennifer Russell