There’s been some debate about how many consumers are actually cutting ties with their pay TV providers and replacing them with over-the-top streaming media services – a trend generally referred to as “cord cutting.” But a recent study indicates that the number of cord cutters in North America is, in fact growing – in 2014, 8.2 percent of former pay TV subscribers surveyed by TiVo subsidiary Digitalsmiths said they ditched their service – an increase of 1.3 percent over the prior year. Meanwhile, a much larger 45.2 percent said they reduced their cable or satellite TV service during the same time frame.
That latter item is sometimes referred to as “cord shaving,” as it’s reflective of the trend toward smaller pay TV bundles as consumers spend more time streaming video via over-the-top solutions like Netflix, Hulu or Amazon Instant Video, for example. Pay TV providers aren’t necessarily losing these customers, but these subscribers are reducing their reliance on their cable and satellite television offerings as they adopt streaming services. And in some cases, dropping down to a smaller pay TV package is the first step in becoming a true cord cutter.
The survey was based on a demographically representative sampling of 3,144 consumers in the U.S. and Canada, ages 18 and older. And while its numbers referencing cord cutters are notable, it’s worth remembering that it’s a survey as opposed to data from service providers – there could be discrepancies between what consumers say and what they actually do.
For instance, 15.3 percent of consumers responded that they plan to either switch (3.1 percent), change (7.4 percent) or cut (4.8 percent) their pay TV service. More importantly, 32.4 percent said they’re “on the fence” about these things, meaning there’s an opportunity for pay TV providers to retain their business by offering new functionality – like better user interfaces on their set-top boxes, or the option to stream to smartphones and tablets.
The reduced consumer loyalty for pay TV providers was attributed to high prices and bad channel selection.
71.7 percent said that cable and satellite’s increasing fees left them unsatisfied. 38.1 percent said these companies offered poor customer service, and 33.8 percent said bad channel selection was to blame. By “bad,” consumers could be referring to an overabundance of channels that they never want to watch, or it could also be related to the fact that it’s difficult for them to find the programming they actually like due to lack of decent search options or better targeted recommendations.
Lately, some pay TV providers have begun going after the cord-cutting crowd with a la carte offerings which allow them to personalize their channel line up. For instance, Cablevision launched cord cutter packages in April and Verizon (disclosure:AOL/TechCrunch parent company) introduced a la carte packages this year, too.
Survey respondents said they were interested in these sorts of options – 81.6 percent said they want to pick the channels they watch, and an ideal price point was, on average, $38 per month.
The so-called “skinny bundles” are reflective of a changing mindset about the value of pay TV and its many, many channel options. 33.4 percent say their overwhelmed with the number of channels available and most (81.7 percent) only watch between 1 and 10 channels. Many in that group (39.7 percent) watch 5 channels or fewer.
In addition to pay TV providers’ move to embrace a la carte programming, Dish launched its own over-the-top streaming TV service called Sling TV that provides a basic cable bundle for a reduced fee. And there are other ways to access network TV programming without cable, too, including via Hulu, CBS All Access and PlayStation Vue, for example.
Consumer awareness around these cable alternatives is growing. Over half (55.7 percent) of respondents were familiar with one or more of these services, with Hulu being the best-known with a 51 percent mindshare. Sling TV followed with 11.9 percent awareness, then PlayStation Vue (11.4 percent) and CBS’s offering (10.5 percent).
Meanwhile, other streaming services like Netflix and Amazon Prime Instant Video offer more ways to watch movies and TV, even if they don’t include all the currently airing programs.
As of Q1 2015, 54.4 percent of respondents said they were leveraging a monthly subscription service like Netflix or Hulu, and the largest group of respondents (33.1 percent) said they watched 1 to 5 hours of content on these services each month. However, consumers are beginning to increase their time spent on these services – there was 2.3 percent quarter-over-quarter growth in respondents who watch 15 to 30+ hours.
Their willingness to pay a little more is growing too. While most (51.8 percent) pay between $6 and $11 per month, the $9 to $11 category grew 2.5 percent year-over-year and is up 6.1 percent over Q1 2013. And the $12 to $14 category grew 2.2 percent year-over-year, and is up 4.2 percent over Q1 2013.
The draw of these services aren’t just the reduced cost, though 51.1 percent cited that as a factor in their use. They’re also seen as more convenient (60.1 percent agreed on this), with better selections of content (38 percent said).
What’s interesting though is that people are also enjoying the way these services let them watch TV – instead of waiting for new episodes, many are now binge-watching shows, or at least are happy to be able to access a full season of programming at once. This feature was cited by 47 percent of respondents as being a big draw for the over-the-top services.
Digitalsmiths has been running its surveys since 2012, however, it was only last year that it began tracking consumers interest in cutting the cord entirely. But now that the metric is being tracked, more data on this trend will be available in future studies.
This was post #9 in an ongoing series about cord cutting in 2015 which examines trends around cord cutting and reviews new services that aid in ditching pay TV. You can read more of the series here: