Michelle Clancy ©RapidTVNews | 20-09-2011
More research has found that the biggest threat to traditional pay-TV is the economy, not over-the-top competitors like Netflix, according to new research from Credit Suisse.
Cable, IPTV and satellite is simply becoming too expensive for a good chunk of Americans to justify, the agency found, so about 20% of U.S. subscribers are today on the fence about cutting the video cord. When it comes down to brass tacks, about 4% of current subscribers say they plan to cancel in the next 12 months.
A full 25% of consumers use over-the-top services, but only half of those said they use these services as a substitute, not an addition, to traditional pay TV.
Traditional video subscription, which can easily reach into the triple digits in monthly cost depending on the number of premium options taken, "is the declining value proposition for a portion of the customer base," wrote Credit Suisse analysts Spencer Wang and Shub Mukherjee. The problem is "not OTT services, in and of themselves."
Among the unsubscribers in the survey, 50% said pay TV is too expensive. Other responses were: "don't watch a lot of TV" (22%), "just watch broadcast TV over the air" (16%) and "don't find pay TV channels compelling" (14%).
Premium channels are looking at rough waters thanks to the economy as well. About 4% of subscribers to premium networks such as HBO, Showtime and Starz are considering cancelling in the next 12 months. As for taking à la carte versions of those services over-the-top, a full 20% said they would be interested. That's a model HBO has been considering with its HBO GO service, but it's unclear how pay-TV partners would take to being cut out oft he distribution chain.
When it comes to loyalty to pay-TV, it's live content like sports that is cable's ace in the hole: A full 80% of pay-TV subscribers cited sports and live TV ("and/or choice") as reasons for subscribing, "implying that this segment is unlikely to cut the cord for the foreseeable future," the analysts wrote.
The survey results come on the heels of Bernstein analyst Craig Moffett citing cable's "affordability crisis" in an era of financial upheaval, where one in six Americans (46.2 million people) fall below the poverty line, according to the U.S. Census (poverty is defined as making $22,000 of below in household income for a family of four, before taxes). Part of it is due to the economic recession that started three years ago. High unemployment is another factor.