For decades, traditional cable, satellite, and telecom providers dominated the subscription-based TV service market with large packages of live/linear channels bundling various content categories. However, as consumer preference for video content shifted online with the explosion and proliferation of subscription-based OTT services, traditional players struggled to keep their core customers subscribing.
Traditional TV customers became frustrated in paying premium prices for perceived bloated non-customizable channel packages that included a lot of programming they did not want to watch. As a result, many completely shifted their paid subscription TV service dollars from traditional to online and spurred the creation of a key audience segment hotly pursued by video service providers: Cord-Cutters.
Parks Associates’ research reveals that more than one-third of U.S. broadband households are cord-cutters who previously subscribed to traditional pay-TV, equating to more than 38 million households. Additionally, less than one in 10 are cord-nevers who never subscribed to traditional TV, which accounts for more than 6 million households.
Though similar in their aversion to traditional pay-TV, these segments are very different. Cord-nevers are younger, less affluent, much less likely to have children in the home, and slower to adopt new technology. Cord-cutters are more active in consuming all types of OTT content and currently spend nearly twice as much monthly on OTT services than cord-nevers.
Among those currently without traditional pay-TV, more than one-third canceled their service at least three years ago. Cost concerns drove many consumers away from traditional pay-TV, and OTT services deliver on the promise that they can offer desired video content at a considerably lower price point.
This surge in cord-cutting has coincided with the explosive growth of OTT video services. These lower-cost services provide video viewers with broad-based programming foundational content offerings and smaller services that fill in niche content gaps.
When they flee pay-TV, cord-cutters essentially unbundle a paid television service.
But a new phenomenon is on the rise: rebundling. Video consumers now find that though they have access to more service options than ever before, no one provider satisfies all of their content needs. As a result, they must stitch together multiple OTT offerings to form their optimal video stack.
47% of cord-cutters subscribe to four or more OTT services, so in order to have an optimal video portfolio, they are creating their own video bundles by stacking OTT services. In addition, this provides viewers the flexibility to watch on multiple connected devices in and out of the home.
Today’s streaming device platforms, such as Samsung Tizen and Google’s Google TV, increasingly reflect this service stacking activity through their rising use of aggregated user experiences - integrating content from multiple subscribed services into a single interface. This aggregation will only grow in utility to cord-cutters utilizing multiple services to obtain the content they desire.
Cord-cutters lead cord-nevers and overall broadband households in uptake to an online pay-TV service, with one-third currently subscribing to one. The firm’s research shows that cord-cutters spend $85 per month on average for their online pay-TV or standalone subscription-based services, roughly $30 less than what they were paying for traditional pay-TV service. Many cord-cutters, who previously enjoyed the paid live/linear experience of a traditional pay-TV service, are finding a relatively seamless transition to an online version of this service type – such as YouTube TV, Hulu + Live TV, Sling TV, or fuboTV.
Moving forward, service providers have to decide how best to be part of that rebundling effort either through a direct-to-consumer offering or partnership, a video aggregation play, or some other approach. Regardless the strategy, providers will be in a fight to capture viewership and associated revenue from elusive cord-cutters and nevers.
Paul Erickson is a senior analyst at Parks Associates with more than 20 years of technology industry experience. Erickson’s coverage has spanned connected consumer electronics, pay & broadcast TV, digital & physical media, streaming devices and services, home and pro AV, smart home, user interface technologies and digital rights management.
Prior to joining Parks Associates, Paul was an analyst for Omdia, IHS Markit, and NPD DisplaySearch. He has regularly attended, spoken, and/or moderated at industry events and tradeshows across the consumer, service provider, and pro AV technology landscape, such as CES, IFA, IBC, MWC, NAB, InfoComm, NAMM, and Integrated Systems Europe. Paul is also a several-time AVIXA Emerging Trends Fellow honoree.
Paul holds a BS in International Business from Georgetown University, an MBA in Marketing from the University of Texas at Austin, and can converse in English, Spanish, German, Mandarin Chinese, and Taiwanese.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceVideo staff. They do not represent the opinions of FierceVideo.