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Summary:

When you’re drowning, you grasp at straws to try to stay afloat. Sometimes you actually convince yourself that you’re standing on dry land. That seems to be the collective response of the traditional TV industry to a recent survey from Parks Associates.

When you’re drowning, you grasp at straws to try to stay afloat.  Sometimes you actually convince yourself that you’re standing on dry land.  That seems to be the collective response of the traditional TV industry to a recent survey from Parks Associates.

The market research firm company found that only 8 percent of U.S. households are thinking of abandoning their paid multichannel services.  Why is that good news?  Well it’s down from the previous year’s survey, which showed that 11 percent were considering “cutting the cord.”  Even better, according to Parks, only a very small amount, perhaps a half percent -– which translates into 350,000 homes — have actually followed through on their intent. You could practically hear the sigh of relief — cable is saved!

I have three problems with this giddy response: math, measurement and morbidity. Let’s get the math out of the way first. Parks surveyed 2,100 of what it calls “broadband households” -– those with access to high-speed networking at home -– to come up with its results. Modern statistical theory holds that a random group of that size can comfortably be extrapolated across an entire population, albeit with one caveat: Depending on the population surveyed, there’s what is known as a “confidence interval,” or what you and I would call a “fudge factor.”

Such padding extends up and down on either side of the actual number. In this case, the confidence interval is 2 percent, which translates into a 4 percent swing centered around the 8 percent number reported in the results. In practice, it means that based on the 2,100 people that the folks at Parks talked to, they are pretty darn sure that the actual population of people considering switching is no smaller than 6 percent of U.S. and Canadian homes with broadband, and no larger than 10 percent.

In last year’s survey, Parks talked to a few more people, but with the same confidence interval. Which means Parks is pretty darn sure that the actual population of people looking to cut the cord last year was between 9 and 13 percent.

Some of you have figured out where I’m going by now.  If this year, the number lies between 6 percent and 10 percent, and last year it lay between 9 percent and 13 percent, isn’t is possible that, perhaps, there’s been no actual change from year to year?  It could, in fact, have been 8 percent, and 8 percent year-over-year.  Or maybe it was 8 percent last year, and it’s up to 9 percent this year.  Or perhaps 13 percent were considering changing last year, and only 6 percent are mulling it over now.

Any of the preceding interpretations would be correct, based upon the statistical validity of the survey.  However, John Barrett, director of research at Parks Associates, insisted to me that there is a “significant difference, but not a substantive difference” between the two surveys.  Or, in layman’s terms, it’s a lot closer to a single household feeling better about cable than a million. Barrett added that in his opinion “the number hasn’t changed that much itself.”

Which brings me to measurement, as in measured audience. The question in this survey was only posed to broadband households that also subscribe to cable or satellite TV.  It ignored everyone who didn’t subscribe –- which was between 10 and 20 percent of the entire sample size.  And media habits, like other addictions, are hard to change. If you’ve got cable now, you’ll probably still have cable 10 years from now.

This is especially relevant when it comes to demographic currently getting out of school and setting up their first households –- the 18- to 24-year-olds, who haven’t had a chance to get addicted to multichannel TV services. And since if they don’t subscribe already they probably never will, they’ll likely never even show up on a “cutting the cord” survey. Indeed, Method VP John Gilles calls this cohort “Cable’s Lost Generation.” “For at least the past five years, the young male demographic has virtually dropped off the map of television,” he notes.

The issue isn’t existing customers dropping off; it’s existing customers dying off that should be of concern.  That’s because new customers just aren’t taking their place.

Which leads me to morbidity. This is exactly what happened to magazines over the last 20 years. Whether it’s Readers Digest, TV Guide or PC Magazine, each of these storied titles used to have viewers aged 16 to 60. Then it was 26 to 60.  And then 36 to 60.  In other words, the audience aged to the point where it just wasn’t economical to keep putting the product out.  I should know, because I was there during the salad days of PC Publishing, and darn near turned the lights off at PC Magazine in 2007.

And that’s the cliff that the multichannel industry is staring at today. Its best and brightest can wrap themselves in giddy surveys that show only (only!) 8 percent of their audience is considering leaving.  But the broader problem is that their customers are dying.  And no new ones are there to take their place.

Jim Louderback is CEO of Revision3. He was previously vice president of Ziff Davis Media and Editor-in-Chief of PC Magazine and PCMag.com.

  1. Cable tv is ancient history in an age of high speed broadband and wireless broadband. Fond memories of Ted Turner and Music Television (MTV) and the truck chasers of the 70s and 80s. It’s 2010 and who has the time for broadcast, cable,or satellite?

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  2. Jim,

    The problem you describe is compounded by an apparent lack of segmentation granularity — even if cord-cutting is not a major threat, that still doesn’t mean that pay-TV service providers are safe. What about the down-graders segment? Read my comments at the end of this related TDG Research post http://bit.ly/cx6HOI

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  3. yeah but are 18-24 year old not getting cable cause they hate cable or because they don’t have much money and need internet more than cable? INternet at least gives them some TV.

    The people I read about who do TV over computer either have no money or are total geeks or both.

    What folks like about TV via the internet is what exactly? Well it’s the cost (free) and it’s the on – demand/ala carte aspect.

    Cable/Satellite can compete with that I think. They are the most efficient broadcasters and if used in conjunction with DVRs they can become on-demand / ala carte providers. What’s the most efficient way of showing an event to millions? Broadcasting it to DVRs or streaming it for each individual?

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    1. Which is more efficient depends on how you want to define it. I’d say Hulu is much more efficient. I subscribe to shows and they go into my queue (and no need to worry about conflicting shows for the DVR to record). When I’m interested in watching TV, I just go to Hulu and the shows are ready for me. It even allows for continuous play of shows in the queue so it can be just like regular TV.

      Also, broadcasting to DVR’s is just fine with internet without cable. I get Revision3 programming and a couple video podcasts on my Tivo. The DVR is also quite capable in handling the local broadcast TV (and actually provides more usable channels than Comcast provides in their basic cable package).

      Really, until cable allows people to opt-out of channels they are not interested in (like for me, ESPN and their $4 per subscriber rate), they will continue to be threatened by a loss of subscribers. As mainstream devices for internet video (like the Boxee box) begin to enter the marketplace , and streaming video gets added to more and more devices (e.g., HDTVs and Blu-ray players), more and more people will realize they can do just fine without cable. The geeks are just leading the way.

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      1. It’s more efficient in terms of delivering the programming to millions. That’s because the costs are essentially static whether delivering content to thousands or millions.

        With delivery via internet the costs scale for each user you deliver content to.

        From what I read this makes the costs per viewer much less for satellite and cable TV delivery than via internet delivery when dealing with very large numbers of viewers (millions.)

        Also, note, if you’re going to buy channels ala carte then you’re going to be charged ala carte prices for them not package prices like you’re currently being charged.

        YOu might save $4 for not getting ESPN, but you’ll be charged a much higher price for each of the channels you keep. The likely result being no savings and less content to you.

        You’re not going to just save $4 and still pay package prices for everything else. Other users will be opting out of the channels as well including ones you like. The result is costs per channel will increase across the board because every channel will have a lower number of takers.

        True about network TV. I get a great antenna hd signal for 7 or 8 stations, but one reason we like cable is for the shows not on the networks. For anyone just wanting the network shows there is little reason to get cable unless you can’t get a good antenna signal. That’s always been the case though right?

        Anyway just saying, in regards to the article, it is premature to conclude 18-24 year old males won’t come back to cable.

        I ate worse food in college than in high school, but that didn’t mean I stuck with the college food after I left. I dumped the Ramen.

        With a tight budget and needing internet more than cable these days, cable gets the heave-ho on that limited budget for a young person.

        But there’s also another side to this – that age group plays alot of videogames and online videogames. About 5 years ago is when the Xbox 360 came out. And made online play easier than ever to access to the masses. World of Warcraft came just over 5 years ago and I wouldn’t doubt that age group accounts for a large portion of the user base of that game as well.

        So there is another question – is the player leaving TV altogether for other entertainment options?

        But again the question to ask after that is will they return to TV? I’ve seen my own patterns of usage. I used to play more online games 8 years ago, but that tends to ebb and flow. You get away from TV and movies and then they become appealing again while games can become boring and vice versa. Also then you get married, and have kids and playing games online and being good at them is not as feasible as it once was. Watching a half-hour or hour TV show is more doable.

        So I’m not sure once the audience is gone it will leave.

        LIke I said most of these kids probably had cable growing up.

        I do think more and more kids will want to watch what they want when they want to. Cable and Satellite will have to do more to address this.

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  4. Yep, you are absolutely correct Jim on all points. Always take survey stats with a grain of salt; the 18-24 year olds w/o multiple products most likely not reflected here; and yes, the baby boomers will probably continue subscribing through inertia until they die. See Hold that eulogy, TV’s not Dead Just Yet post (wp.me/pxoDD-2y)

    There is one way that these baby boomers will start to move online: hulu.com. These are the loyal TV fans who used to record their favorite but missed shows on their DVRs. But recently, they’ve been turning to hulu.com to do that instead. See Online Video is Becoming the New DVR (wp.me/pxoDD-5n). It’s happening a lot faster than most people thought and I believe that trend will only accelerate as us boomers forget to set the DVR to record stuff in the first place!

    All the changes happening now in the online space is great and the bigger it becomes, content will once again become the driver.

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    1. Isn’t a dVR and antenna tV > Hulu?

      The average joe can’t even watch Hulu on their TV screen. And the quality isn’t up to SD standards let alone HD and you can’t watch every show on Hulu that you can watch over an antenna that picks up 7 or8 major hd networks.

      Hulu lets you watch a bunch of old shows wheneer you want. Has a few on-demand movies that are decent with alot of so-so stuff.

      I’ll give the site props for letting us watch clips of late night talk shows. ON the computer though for most folks.

      And true you don’t have to “set your DVR.” But you can’t keep around shows on the service either other than the last few they choose to keep around.

      And who says some of this internet TV stuff like Hulu remains free? Right now I think it’s a test case and is looked at as additive revenue. IF they think it has to replace other income streams then the game changes overnight.

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  5. can you pls fix the typo end of second paragraph is this is being moderated before posting? :-)
    accelerate as us boomers

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  6. DirecTV just announced another 12% rate hike, in the face of a bad recession. I’m cutting the cord, at age 58. I like the nature shows but these corps. apparently can’t figure out if their customers are viewers or advertisers. They just keep piling on the ads. No one can serve two masters.

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    1. Where else are you going to go?

      You have the antenna if you just want network shows.

      You have iTunes and Apple TV if you want to purchase their solid yet still limited collection of TV shows without commercials. More likely to be a good deal if there is only 1 or 2 in your household – no commercials not withstanding.

      Hulu has very limited content and not too easy to get to the TV screen. And picture quality isn’t what I could call good and I’m not too picky.

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      1. Not sure how you’re watching Hulu, but the quality is just fine for me. Not 1080p, but definitely better than SD.

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  7. Chris, you seem hell bent on defending cable…you wouldn’t happen to work for Comcast (sorry, Xfinity), whould you?

    Really, there isn’t a whole lot of debate here. I dropped cable TV when I moved into the new place, not because I couldn’t afford it or I was too busy, I just didn’t want it. In fact, I should clarify there. Comcast’s Internet only package didn’t have the bandwidth I needed, so I had to jump up to the next package which does include basic cable and a tuner. Except the tuner is in the storage closet, because there is no reason to plug it in.

    All of the content I watch is either through Netflix streaming, or if I absolutely have to watch something when it comes out (for the networks that don’t have a streaming deal with Netflix) I can get it on the 360 video marketplace. The latter situation is pretty rare though, as I always have at least 250 titles in the queue. With that large of backlog, I have plenty of content to watch until what is airing now meanders it’s way onto either Netflix’s streaming or disc services.

    I used to hold TB’s worth of video on my file server and stream it to the TV on an original Xbox using XBMC, but even that is not necessary anymore with the online streaming services and increased WAN bandwidth.

    I know quite a few people, some older than I, who are doing the same thing. A few of them are on OTA broadcast because they want the network shows in HD, but most of them simply pull everything over the Internet.

    As for watching content on a computer versus a TV itself, I personally couldn’t do it. I live for audio and video fidelity, I am already cringing that Netflix’s HD content is not yet in 1080p; but in that I am certainly the minority. Most people simply don’t care, and consider that for the average person, it is more likely they have spent more money (and upgrade much more often) their computer than their TV.

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  8. I think it has a lot to do with the overall quality of programming, combined with a “pick and chose” trend in multimedia consumption experienced primarily among younger age groups.

    Significantly enhancing their product and keeping up with media consumption trends is the ticket to sustain cable.

    What they ought to be focusing on is getting ahead of the curve; refocusing their model towards offering massive on-demand libraries and improved live offerings that can be accessed across a wide array of devices (e.g., ~All of your favorite shows, anytime, anywhere, on any device).

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  9. Cable will survive simply because it offers a high-capacity wired alternative to telco, and in some cases, at a lower tax rate.

    Unfortunately, the geniuses who price cable are typical MBA’s who don’t understand how to serve diverse groups of customers or calculate revenues that aren’t linearly flattened. Cable would gain customers and revenue if they simply did the hard work and let us truly buy “ala carte”, rather than forcing bundles and tiers.

    This viewer pulled the plug years ago, because cable wanted more than $60 a month for the one channel we wanted to watch. We’d gladly pay to watch another 15 or so channels of our choice, but half of those required another “tier” and even further expense.

    Add to that the 20-60% increase in box rental fees and the skyrocketing taxes in some cities, and we’re happy to remain unplugged for another year or more. Meanwhile, OTA is slowly adding non-traditional channels on multicast.

    So we have a cable modem, only. And we’ll probably keep it that way. And we’re far from the 18-24 male demographic.

    Oh, yeah, I forgot to remind them to blame their problems on the “content providers”.

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  10. Jim,
    Thank you for writing about the press release and generating the feedback on the cord-cutting topic. The topic is one that is obviously generating high interest, so we appreciate you citing our research and providing a forum for feedback.

    I wanted to follow-up on a few of the points you made. You’re correct in discussing the margin of error in surveys, and our studies do come with a margin of error of plus or minus 2%. So, yes, there can be movement from one side to the other of the data points that are presented.

    The important thing for us to be tracking is whether there is movement of that population of consumers likely to cancel their pay-TV services above that margin of error from one study to the next. So far, we haven’t found it, but it’s a question that we are tracking consistently to see if movement is occurring from one study to the next.

    Your comments and those from other readers have also focused on consumers in the 18-24 age range. They were included in this study, and they’ve provided some interesting insights:
    – Consumers in this age range are just as likely to have a current pay-TV subscription as the other consumer age groups;
    – This group of consumers is more likely to express high satisfaction with the video-on-demand and high-definition features that they are receiving from their pay-TV provider;
    – They are no more likely to express dissatisfaction with the cost of their service;
    – When it comes to service churn and/or cord-cutting tendencies, they are more likely than the average respondent to consider churn to a different provider, and they are swayed more with offerings of expanded VoD and high-definition channels;
    – There is evidence that they are not as loyal to pay-TV as an older consumer, as their reported likelihood of cord-cutting is higher than other age groups (11% of respondents in this population); and
    – Respondents in this age range are more likely to agree with the statement that “If all of the video on the Internet was available on the TV, I would no longer subscribe to [pay-TV services].”

    That last bullet point about the impact of online video’s availability for viewing on a TV is one that perhaps has generated some of the most-interesting findings within the All Eyes on Video study. This survey does help to validate the notion that once alternative methods of viewing over-the-top video content (connected game consoles, connected TVs and Blu-ray players, networked digital media set-top boxes such as the Roku Player or Apple TV, etc.) grow in larger numbers, then the inclination to consider cord cutting is significantly enhanced. Our study finds that consumers who have used a connected game console or a TV connected to a PC (these are significant chunks of households … more than 12 million) to watch online video are about 3x more likely to consider cutting the cord. So, the theory that the game console could challenge the supremacy of pay-TV services is certainly validated with the results of this study.

    So, how do pay-TV providers respond to this potential threat? The study results do point to the strengths of pay-TV services, which include the ever-growing libraries of video-on-demand content and expanded high-definition programming. It was these two features – and specifically the migration of high-definition content to 1080p resolution – that are two key arrows in the pay-TV providers’ quiver, as these features – if offered by an alternative provider – generate the most interest among consumers in considering a service provider switch. We even found a good percentage of consumers indicating a willingness to pay a premium for “TV Everywhere” kind of features, and we found higher interest in the 18-24 and 24-34 age ranges.

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  11. I think we’ll see a gradual peel back of cable services over time, even among the boomers and those ingrained into multi-channel services.

    Although I hardly hold myself up as typical, I do spend a lot of money on DirecTV and on their baseball and football packages.. or at least I did.

    I’m not paying the $300 for the MLB extra innings package this year, because I can do the MLB online package for $110, watch it in near-HD through my Roku box, and have access everywhere on my PC. That’s at least 2x better (see it everywhere, on every TV, with games available in the cloud on demand) and 1 drawback (quality is not as good).

    So I just saved nearly $200. and if I could get the Patriots NFL games on demand I’d drop that Direct Ticket like a hot potato too.

    It won’t be a bang, but a slow whimper. But over time it will be gone.

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