TDG Profiles 'Cord Cutters' and 'Cord Nevers': Operator Challenges Beyond TV Everywhere

In early October, I wrote that the so-called “Facebook (News - Alert) generation” presented pay TV service providers a larger problem (customer acquisition) than they face deploying TV Everywhere solutions to retain current subscribers.

I essentially called their TVE focus shortsighted. Check it out here.

I stated then: “Pay TV subscription providers need to expand their focus beyond TV Everywhere retention strategies to acquisition-driven offerings to ensure they have customers to retain as the Facebook generation expands exponentially.”

Just yesterday, the most respected video industry research and consulting firm, The Diffusion Group (TDG), released a report that reinforced much of what I claimed. I recommended operators focus more on those consumers that had never had cable or telco TV (calling them “Cord Nevers”) than those who have, for long-term success.

The TDG report defines and describes, for I believe the first time, consumers that have cut the pay TV subscription “cord,” as well as those that are unattached. This precise data holds the key to helping operators think and act beyond their current core focus of retaining pay TV subscribers.

The content is the result of a broad survey of consumers.

The Pay-TV Refugees

While TDG said it expects the number of Pay-TV Refugees in both segments (Cord Cutters and Cord Nevers) to increase over the next five years, it is Cord Nevers that comprise the most immediate challenge for pay-TV operators, warns Michael Greeson, TDG Founding Partner and director of Research.

The TDG Report, PayTV Refugees: A Primary Profile of Cord Cutters and Cord Nevers, profiles, in detail, the Cord Cutter and the Cord Never, with the Cord Never aligning with the Facebook generation that I cited after the Video World Conference in early October.

“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,” according to the TDG report. “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.”

Aware (News - Alert) of Alternatives

TDG explains, “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 (News - Alert), 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.”

Greeson says: "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."

Behind the Numbers

The TDG report focuses on consumers with broadband access, which it breaks into the two groups.

“The percent of broadband households doing without pay-TV has increased from 9.5 percent in late 2010, to 11.2 percent in late 2011, to 12.5 percent today," noted Greeson. "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 says its new report offers “a detailed research-based profile of two contemporary service segments of relevance to the pay-TV and over-the-top video industries. Featuring demographic and behavioral profiles of both segments, the report offers a unique glimpse into the homes and minds of consumers that, for very specific reasons, have said ‘no’ to traditional pay-TV services.”

The advisory services firm adds that the report also offers forecasts for pay-TV and home broadband subscriptions, as well as the growth of Pay-TV Refugees through 2017.