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Cable Technology Feature Article

August 10, 2012

Even Cutting Price 50 Percent Would Not Entice Many Video Cord Cutters

By Gary Kim, Contributing Editor

About 33 percent of people who have “cut the cord” on their video entertainment subscriptions would not buy again, even if prices were cut in half, a study by TechBargains.com has found. Even granting the tendency survey respondents have to casually report they will or will not do things, only to be contradicted later, the survey shows the increasing difficulties video entertainment distributors now face.

Many -- even many within the service provider value chain -- would agree that the video entertainment/subscription price-value relationship is worsening. Recurring monthly prices, relative to value, are getting too high. But a growing problem might be that the product itself has little value for a small but growing percentage of potential consumers, who sometimes seem to find enough value in online products.

According to a new survey conducted by Alan Quayle, 88 percent of respondents say they pay more for service than they would prefer. Some 41 percent consider subscription TV "expensive" and 24 percent are evaluating options to lower their bills.

So the big unknown is whether even growing dissatisfaction will lead to actual abandonment, and if so, by what percentage of current video entertainment subscribers. Keep in mind that, for decades, consumers had complained about cable TV service.

And yet, for decades, some 90 percent of U.S. households have continued to buy subscription TV, a product that routinely scores among the worst of any U.S. products, on a consistent basis. Nor is it unusual for any survey to find a significant percentage of users contemplating a change, especially to over the top alternatives such as Netflix, Hulu (News - Alert) or YouTube.

The most disliked companies in America once again include airlines, utilities and banks, according to the latest cycle of ratings from the American Customer Satisfaction Index.

The point is that "mere" unhappiness does not mean consumers will abandon video subscriptions in large numbers. In fact, even the advent of satellite and telco TV competition has only shifted share from cable to the other providers. Overall demand is largely consistent with past levels. 

Still, there is disquiet in the industry, as there should be. Basically, most consumers using the Internet also watch video on the Internet. Virtually all respondents to the Quayle survey watch shows or movies from the Internet, with 27 percent watching them on a standard TV using Roku, Smart TV, Apple (News - Alert) TV, Boxee or other devices such as game playing consoles.

Up to this point, most observers would say that over the top video viewing complements subscription video entertainment. Those observations likely are correct. The issue is how long it might take before the gradually increasing amount of professional video available online becomes a substantial percentage of the content people expect to see when buying cable, satellite or telco video.

The Quayle survey confirms high levels of dissatisfaction. The issue now is when a major break in the business will occur.  

And the Quayle survey illustrates the problem. Despite the fact that 83 percent of surveyed cord cutters abandoned their video entertainment services because of the “high cost,” even a price cut in half would not be enough to entice many cord cutters to buy again.

Significantly, the study also suggests that video entertainment services are not even viewed as providing the best quality and variety of programming by 17 percent of people who disconnected their cable TV or satellite TV services. For an industry that claims to provide the best quality and variety, that is a problem.

Another possibly-significant finding is that consumers who abandoned their fixed network phone service were two times more likely to eliminate their cable TV or satellite TV subscription than those who have not disconnected their home telephone.

Of respondents who have gotten rid of their landline, 36 percent also discontinued their cable TV or satellite TV service. Of respondents who still have their landlines, 19 percent have cut the cable cord.

The survey found that 60 percent of respondents no longer have a landline telephone.

The survey also found that 57 percent of people that still have a landline voice service  do not plan to disconnect their landline in the next year. That statistic might be only mildly reassuring, since it suggests that 43 percent might cut the cord on their fixed network voice service within a year or two.  

It might be instructive, though, to keep in mind that the respondents likely are younger users, might be users who are strongly motivated to “save money” or who are less committed to video entertainment services because they do not value it as much as other users.

But the survey also suggests that a growing number of consumers do not want to buy video entertainment services. Price is not the primary objection; they simply do not want to buy the product.  

Want to learn more about how video is helping to transform the industry? Don’t miss Video World Conference & Expo, collocated with ITEXPO West 2012 taking place Oct. 2-5, in Austin, TX.  Stay in touch with everything happening at Video World Conference & Expo. Follow us on Twitter.

Edited by Rich Steeves

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