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Summary:

The real challenge facing pay TV providers might not be retaining existing cable subscribers with jobs and families, but convincing college students and young adults living with their parents to become cable subscribers when they get their first jobs and move in to their first homes.

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There’s still some debate over whether or not pay TV subscribers will begin canceling their cable subscriptions, and choosing to fill their entertainment hours with online video instead. But the real challenge for such providers might not be retaining existing cable subscribers who already have jobs and families, but convincing college students and young adults living with their parents to become cable subscribers when they get their first jobs and move in to their first homes.

Thanks to an aggressive connected-device strategy from over-the-top video providers like Netflix and Hulu, a new generation of young people has grown up with access to content on demand and on multiple devices. This is similar to the debate that played out during the early 2000s, as a generation of college students increasingly turned to wireless mobile services, eschewing landline connections that their parents relied on. The question is whether cable, satellite and IPTV operators will be more successful in converting the younger generation to pay TV subscribers than telcos were in driving interest in fixed-line phone services.

On a panel of connected TV experts at the National Association of Broadcasters show, Senior Director of Sony’s PlayStation Network Susan Panico said she sees the PlayStation 3 audience — which is primarily young and male — is becoming increasingly comfortable with viewing content online and not paying for cable, satellite or other traditional distributors to access it.

“Kids are growing up digitally,” Panico said. She said that access to services like Netflix and Hulu Plus is giving that audience “a reason to disengage with cable… There’s a changing usage pattern there” with the 18-24 demographic.

By contrast, pay TV operators have been slow to make their own video services available online and through new devices like Apple’s iPad and Internet-connected TVs and Blu-ray players. That’s been one impediment to attracting a new generation of connected video viewers.

“We were trained to get all of our content in the living room, but kids today were not,” said Intel’s (s INTC) General Manager of Retail CE Products Wilfred Martis. “[They say], if I’m going to sign up for your content, I want to get it on every screen I own. It better be on every screen or the new generation is not going to adopt it.”

Operators are catching on, and companies like Comcast, Time Warner Cable, Cablevision and Verizon are making applications available on the iPad that enable viewers to access cable content through the device. Some are also building apps for the next generation of connected TV platforms, hoping that IP applications could provide a better user experience for their subscribers.

But even so, they will also need to compete with services that are offered at a fraction of the price of most pay TV offerings. Netflix and Hulu Plus are both available for $8 a month, much less than the average $70 bill cable subscribers pay. To get young people on their first jobs and in their first apartments to sign up, cable, satellite and IPTV providers will need to find ways to be more competitive.

That’s something VP of Video Services for Comcast Media Center Richard Buchanan acknowledged on the panel. He said Comcast is working on ways to capture that new audience with basic packages that it hopes will get young people on board, and to grow revenues as their income grows.

Photo courtesy of (CC-BY-SA) Flickr user Akarsh Simha.

  1. its NOT about being on every screen. its about affordability. A playstation is still hooked up to a TV. Same with my Roku. The cable companies don’t get it and I tnk they are mis-reading the net generation BIG TIME.

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  2. Michael Carpentier Monday, April 11, 2011

    Very solid point here. I keep hearing about people simply not opting in for cable and instead going online. Many broadcasters are offering apps to watch the shows online. With the iPad2 there has been a groundswell of them!

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  3. It’s not just about affordability. It’s also the ability to choose what you want. I had satellite for 13 years, ditched it when content quality declined (FauxNews, reality shows, other budget-cutters) and ad quantity increased. They forgot who their customers are. Plus endless price increases.

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  4. This is an insightful article and is backed up by the Nielsen data on cord cutting. While there is really zero trend of actually cutting cords, there is an uptick of no-TV households among the young.

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  5. Young male viewers are also big consumers of live sports which isn’t mentioned in te article at all. Before they abandon cable altogether, that need has to be filled.

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  6. I can say as a 2009 college grad, I’ve got a couple problems with the cable model: ads and affordability. If I’m getting OTA HD, I expect ads will come along with it, since I’m not paying anything. However, if I’m the one fronting the cash, there’s about a snowball’s chance I’m going to put up with ads. You pay for a bunch of channels you never watch, and the channels you do watch typically loop shows (my wife once commented on having seen a particular episode of NCIS for the 4th time that week). Even using a DVR doesn’t help, as some unscrupulous cableco’s mark dozens of reruns as “new”, quickly filling up the DVR, and only allowing 30s jumps, usually forcing you to have to deal with the commercials anyway. We also like to watch movies more than shows. Thus, my wife and I chose to use Netflix since about the time I graduated.

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  7. I am 23 and a member of Gen Y, but there are a few key reasons why I will probably never stop paying for cable in the foreseeable future.

    1) Lack of premium content availability. Netflix has come quite a long way, but they’re still struggling to get basic movies and TV shows approved for streaming. Not to mention content from premium channels like HBO and Showtime are currently not available on Netflix, even as a paid add-on. Starz is contributing some of their content, but the selection just is not robust enough.

    2) The only free streaming content on Hulu seems to be network television. That’s fine I suppose, but why the hell would I pay money for a Hulu+ subscription when I can get it as part of a $8 basic cable package? Does not make sense.

    I’m definitely willing to be persuaded, but I can’t go without my Scripps!

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