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Summary:

U.S. consumers are not racing to replace their pay-TV subscription with online video services, according to research from Nielsen. In fact, it reports just the opposite is happening: the number of households that have signed up for cable and broadband together has grown dramatically.

cable breakup

Consumers are not racing to replace their pay-TV subscription with online video services from providers like Netflix and Hulu, according to new research from Nielsen. Nielsen says its research “busts the myth” that consumers are going broadband-only and cutting the cord — essentially canceling their cable subscriptions.

In fact, the research firm reports that just the opposite is happening: The number of households in the U.S. that have signed up for cable and broadband services has grown dramatically over the past two years. Nearly two-thirds of all U.S. households had both pay-TV and broadband subscriptions as of January, according to Nielsen, up from 61.6 percent in 2009 and 54.8 percent in 2008 as cable subscribers subscribers signed up for broadband to complement their existing pay-TV services.

Meanwhile, the percentage of households that has gone broadband-only increased just slightly over the same two-year period, to 3.9 percent from 3.2 percent in 2008, and remained essentially flat over the past 12 months.

As to online video, while Nielsen concedes that the number of people it grew 6 percent year-over-year, and the amount of time they spent watching video on the web grew 9 percent, it’s still a relatively small market compared to traditional TV. According to the research and measurement firm, only 2.5 percent of video viewing occurs online.

And according to Howard Shimmel, SVP of client insights for Nielsen, the shift to online video viewing only is happening in “small packets of the population” that “reflect a younger population of college graduates and lower to middle income consumers who may not be fully convinced of the need to pay for digital cable.” But those viewers also watch 40 percent less TV than the national average, and while they typically stream twice as much online video as the average U.S. consumer, they’re still only watching about 10 minutes of online video per day.

While the cable industry isn’t seeing a mass exodus from its pay-TV subscriptions yet, it should take heed of what happened in the telephony market over the last decade or so: in the early 2000s, mobile-only telephone users were limited primarily to a “younger population of college graduates and lower-to-middle income consumers” who were not convinced that they needed a landline in the home. While a relatively niche phenomenon then, the number of consumers who use their mobile as their primary or only phone has increased dramatically over the years, while the percentage of U.S. households with landlines has been in steady retreat.

That is to say: just because the trend hasn’t happened yet, doesn’t mean it won’t. Cable operators should keep an eye on recent college graduates. Their interactions with technology have a funny way of foretelling the future.

Cable chaos picture courtesy of Flickr user comedy_nose.

Related content on GigaOM Pro: With TV Apps, Over-the-Top Video Gets New Backers (subscription required)

  1. MObile telephones are a different story than cable tv.

    Don’t assume they are the same.

    hdtvs are what has kept cable booming. More people are paying because of that.

    Cable has all the programming too.

    Young are only doing online video because it is cheap. And many who are watching online only don’t watch much tv in the first place.

    IF everyone gets their tv from online then you’re going to be paying for it anyway so … water under the bridge.

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  2. I don’t think that the data shows the real trend because the cable companies have been trying to fight this with all they got. Case in point, I cut my cord about six months ago and as soon as I did, Comcast started to call me up and offer cable+internet for less than what I was paying for internet. I still turned them down because I’m tired of having to juggle their freebie offers that get expensive when they expire, but I bet a lot of people say sure why not. The real question that the cable companies should be answering for their investors is how many consumers out there have been given concessions to not cut the cord? I think if we took this into account, the data would look much different. Maybe able will always try and subsidize those of us who are more price sensitive, but eventually it will be too hard for them to give a free lunch to everybody.

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    1. That’s a good point – I bet the mere fear of cord cutters has been motivating cable co’s to offer some pretty sweet retention deals.

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  3. I think the industry understands what happened to both telephony and the publishing industry. The “TV Everywhere” initiative is a direct response to this threat, aimed to keep subscribers around as viewing patterns change.

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  4. All it takes is one successful profitable “must-see” web-series that doesn’t get enticed by broadcast and cable networks to move to them and the shift will start. It is NOT technology that will cause the shift. It is content.

    We switched to CD not because it was better than audio tape but because Michael Jackson was paid by Sony a truckload of money to release his “Bad” album on CD. All his millions of fans then got CD players and the shift happened.

    If broadcast and cable networks want to beat back the tide, they can. All they have to do is sign up all successful profitable web-series to air on their channels. However, there will come a point where there’s no place on their channels to put web-series and at that point the shift will still happen.

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  5. you are wrong about the early mobile days. It wasnt the young that were early adopters, it was the wealthy. it took a lot of money to get a car phone installed in your car.

    Then when the flips came, it wasnt youth, it was those who could afford them , or bought for work reasons.

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    1. Mark,

      Sorry, you’re wrong. You didn’t fully understand what Ryan had written. He wasn’t referring to the early adopters (which you’re referring) but to the cellphone-only users. The wealthy didn’t give up their landlines until only recently and many still have both cellphones and landlines. It was the young adults and lower-to-middle income families who went solely cellphone for economic reasons. They simply couldn’t justify having both a cellphone and a landline anymore.

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    2. Ryan Lawler Friday, June 18, 2010

      Mark, I have to disagree. Anecdotally, my friends and I all graduated in the early 2000s, and not a one of us had gotten a landline out of school — we were all wedded to our mobile phones. And we were hardly what you would call well-off — we were just loathe to get a landline when anyone who wanted to call us could do so on the mobile, and with more likelihood of actually reaching us.

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    3. Good point. I think the use of the landline is changing. I bought my first answering machine so I could keep in touch with people when I was not home. Now I use it mainly so I do not have to talk to people when I am home. I wonder how many people these days use the cell to talk to people, and the landline to give a phone number to people that they don’t want to talk to.

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  6. cut myself off. And a lot of those same corporate users were the first to cut the cord. They were single, had the money to spend on a phone and realized they didnt need a land line.

    Any younger or poorer, and they were living at home and not making decisions on home utilities

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    1. Mark,

      Again, you’re wrong. Corporations have NEVER given up on their landlines. Please name ONE major corporation that has gone cellphone-only. Name even ONE cellphone company that has gone cellphone-only. Corporations still use landlines. It is how they control the incoming calls. It is how their secretaries and receptionists screen and transfer calls. Every corporate cubicle has a landline extension in it.

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  7. [...] article from newteevee.com, Cord-cutting a ‘Myth,’ Says Nielsen — But Will It Be in 5 Years? by Ryan Lawler.  Nielsen research is showing cable subscriptions are growing, while households [...]

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  8. Be weary of Nielsen numbers. They are notorious for being statistically irrelevant due to their relatively low sample size vs. the broad trends they are commenting on.

    Cutting the chord for the “older folk” is difficult as they have developed a set pattern for consuming media on that platform. For today’s youth, media consumption in the home has NEVER been on one platform. It is coming in from TV, Computer, Radio (terrestrial & Satellite), PMPs, PVRs, cell phones and such. Cutting the cable isn’t as big a deal as it is for their parents & grand parents.

    This will change though. As this group grows up, their time spent cruising for content on the internet will dwindle as they start having families. Quick and easy access to content is what they will need. TV, even today’s TV, offers this kind of access. Hell, they invented it!

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  9. [...] Cord-cutting a ‘Myth,’ Says Nielsen — But Will It Be in 5 Years? [...]

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  10. I think that in order to better understand the situation, there is one very basic question to ask – why are we even talking about cord cutting? “cords” have been around for a long time, so what has changed?

    The answer is for sure very trivial and simple – the Internet – but I would add just another word here that, in my opinion, is much more important for understanding what’s going on and what is going to happen:

    Culture.
    The Internet Culture.

    Man, people are just behaving different today. In everything they do – the way they talk to each other, the way they meet, the way they pay, how much they pay and for sure – the way they consume and experience video. it’s just changing – more social, more interactive, more content, at your own convenient time, with the reasonable payment and so on.

    So it doesn’t really matter if it’s ‘cords’ or ‘clouds’, the one that will satisfy this culture’s new behavior and needs will prevail. The internet players seem closer to the target though :)

    Tzahi

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