Fear of cord-cutting first gripped the traditional TV ecosystem in 2008 and 2009 during a downturn in the global economy and the early days of Netflix’s Instant Video service. Over time the short term anxiety within the industry lessened as video viewing on Netflix and other OTT services appeared to be largely complementary to pay-TV services. However, the new wave of OTT video services has renewed those fears, causing many traditional players to re-examine the impact that cord-cutting and cord-shaving may have on their businesses.

Parks Associates research shows consumers that subscribe to an OTT service do appear to be more volatile in their subscription uptake habits than consumers that do not subscribe to an OTT video service. OTT subscribers are three times as likely as non-subscribers to cancel their pay-TV service and almost twice as likely to change to a new pay-TV provider. Yet, they are also 3.5 times as likely to upgrade to a higher tier pay-TV package or to add upgraded features.

There are three separate groups of OTT subscription consumers:

• The first group has a passion for video and the means to pay for it. These consumers are more likely to upgrade their pay-TV features as well as their broadband service. They are also willing to switch providers in order to receive additional content or features that are unavailable with their current service. This group is the most likely to have multiple OTT services along with a feature-rich pay-TV package.
• The second group enjoys video but cannot afford all of the video options that they want. Rather than choose OTT video services to replace pay TV, they choose to downgrade and supplement the smaller package with OTT options. They also may be open to switching operators in order to get the content that they want at a lower price.
• The third group perceives a lower value in pay TV compared to the other groups and may be open to discontinuing their pay-TV service and to use online video or other entertainment options instead.

For more information on the expanding market for OTT services, including consumer demand, threats, and success factors, see Parks Associates’ industry report TV Everywhere and the New World of OTT.

Further Reading:

• 360 View: Entertainment Services in U.S. Broadband Households
• Under Attack: Assessing New Threats to Pay TV
• 7% of U.S. households have broadband and OTT but no pay TV

Next: Consumers Want Specific Content from OTT Services – New Whitepaper
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