Studies suggest pay-TV subscribers loath to opt out
Forget cord-cutting; the latest wave of research on pay TV subscribers attests to plenty of cord-cuddling.
Multiple studies released this month offer evidence that consumers are inclined to cling to their multichannel video packages from cable, satellite and telco services.
Video discovery platform provider Digitalsmiths conducted a survey in August that found 81% of respondents were either satisfied or very satisfied with the value they received from their pay TV providers. J.D. Power and Associates reported increasing approval rates in July vs. last year across four different regions of the U.S. in its annual Residential TV Service Provider Satisfaction Study.
Frank Perazzini, director of telecommunications at J.D. Power, notes that the pay TV industry is not only registering its second consecutive increase in its survey but also improving its standing against other industries.
“What we’re seeing actually is that residential TV used to be near the bottom of the rankings and is now starting to creep up,” he said. “While other industry averages are relatively static, TV is starting to make some hay.”
Numbers like those might seem contrary to the never-ending headlines and social-media grousing about all that ails the traditional pay-TV biz, including rising subscription prices, contract disputes with programmers that end in blackouts and a growing tide of cheaper digital alternatives like Netflix.
It’ll be interesting to see whether the research is borne out during the third-quarter earnings season, which will bring an update of just how many video subscribers have been lost by leading multichannel video distribs such as Comcast and DirecTV. Nomura Equity Research projected net losses of 419,000 video subscribers across leading multichannel providers for the quarter — the sixth consecutive quarterly decline but still up 102,000 over the losses they saw in the third quarter of 2011.
The reluctance to opt out of pay TV subscriptions may be less about enthusiasm than about inertia. That’s how analysts at PricewaterhouseCoopers saw it in a “consumer loyalty” survey in July and August of over 1,000 consumers ages 18-59 that gauged interest in wireless phone service in addition to pay TV. Nearly three out of four surveyed indicated they had no plans to change providers in the next year, and 59% hadn’t bothered switching providers within the past year, which PwC chalked up to complacency.
“Many consumers remain loyal due simply to the absence of a negative because it is often easier to put up with something that is less than perfect than go to the trouble, and potential expense, of switching,” according to the report.
Satisfaction, however, may be fleeting according to the Digitalsmiths survey, which received 2,000 responses online. Of the four-fifths who registered satisfaction, 38% said they would consider changing services within the next six months.
But rival pay TV services are likelier to benefit from that switch than so-called over-the-top apps like Netflix; 65% of those surveyed didn’t use those services at all. Of those who did, HBO Go — which can be only accessed in combination with a multichannel subscription in the U.S. — had more traction than the top pure OTT player in the survey, Hulu, 16.4% to 14%.
Of the one-fifth of Digitalsmiths respondents who claimed to be dissatisfied with their pay TV service, the overwhelming majority cited rising fees as the reason for their dissatisfaction.
The reason more subs seem to accept rising fees may be rooted in pay TV’s value relative to many other unrelated products. Earlier this month, Bernstein Research analyst Todd Juenger calculated a 4.7% compound annual growth rate for pay TV between 2005, when it averaged $55, to 2011, when that price reached $72. While he found that figure to be nearly double the rate of inflation, pay TV still lagged behind the price growth other offerings saw over the same period including a gallon of gas (7.9%), a cup of coffee (15.9%) and even pet food (4.8%).
Juenger jokingly noted that the hullabaloo around rising pay TV costs doesn’t seem to carry over to other areas. “You don’t often hear of pundits warning of a pending crisis because the cost of dog food is spiraling out of control,” he wrote.
J.D. Power found that subs who paid more for pay TV were more satisfied, with premium-channel consumers more likely to recommend their service than basic-tier subs. Regardless of the tier, those polled registered increased satisfaction when specifically asked about cost of service, one of six dimensions J.D. Power measures (others include programming, customer service and billing).
All this isn’t to suggest that pay TV can now kick back because its market share won’t budge until the end of time. The numbers seem to suggest more that the threat of subscriber erosion may not be as imminent as it is made out to be.
There are plenty of warning signs in the research that the pay TV industry needs to remain vigilant about ceding ground to competitors. Younger demos showed significantly less devotion to multichannel brands and more willingness to switch, particularly when it came to new features. Half of respondents ages 18-29 told PwC they were “likely to use the Web to satisfy their entertainment needs,” which could bode well for the Hulus of the world.
But in the short term, Perazzini believes the pay TV biz is reaping the results of increased investment in added features from DVRs to TV Everywhere viewing extensions.
“What we’re seeing is you’re getting more today from your pay TV subscription than you did in the past, especially for those who bundle it with Internet service and phone,” he said. “If you compare that to residential banking, you’re not getting significantly more returns on your home savings account.”