Laura is a 23 year old woman who graduated college last May. She got a job in a state different from where she graduated college and upon settling into her own one bedroom apartment, she didn’t bother to get either cable or satellite television service. She has had some experience with pay-TV service, as she watched traditional over-the-air and cable/satellite channels during her childhood as her parents subscribed to a pay-TV service. In the dorms during freshman and sophomore years, she watched television channels as they were broadcast because the dorm buildings had cable TV service. However, once she moved into an off campus apartment, she and her 2 female roommates did not get pay-TV service, so it was natural for her to continue down the path as a Cord Never.

Laura is based upon a real life interaction that I had recently, and her experience is indicative of many of the broader data points that Parks Associates examined in a recent publication, Pay-TV and the Reality of Cord Cutting.

Many Cord Nevers are older than Laura and started to establish households in a time where pay-TV penetration was slightly higher than it is now. As a frame of reference, pay-TV subscribers represented 87% of broadband households in Q1/2014, but only 81% of broadband households in Q3/2016. However, Cord Nevers are more likely to be found amongst the youngest age cohort (18-24) of broadband households.

Many industry experts have expected that young consumers would adopt pay TV when their age and income levels increased, but data points are beginning to indicate an ongoing reluctance to adopt. Data points also indicate for Cord Cutters, the longer that one stays away from pay TV, the less likely they are to ever re-engage with pay-TV services. For Cord Nevers who have never parted ways with their own money directly to a pay-TV service provider, it is reasonable to say that they will have similar or greater emotional detachment from pay-TV service, and their likelihood to subscribe is likely to be diminished.

If the trend continues of younger consumers failing to subscribe to pay TV service, the overall subscriber base of pay-TV services will continue to trend older. Those 55 and older are comprising a larger share of pay-TV subscribers. In Q3/2016, nearly 40% of pay-TV subscribers were 55 and older, up from 28% in Q1/2014. When something is associated primarily with an older populace, it is often a sign of being in a later stage of the product life cycle, which is when declines happen. Many pay-TV service providers are multiple system operators and are not fully dependent upon pay-TV service as their sole source of revenue. However, keeping pay-TV revenue per user up will enhance organizational financial outcomes. Operators must act quickly to avoid displacement and negative financial repercussions.  

Further Reading:

• 15% of U.S. broadband households have antenna-only TV service
• The Impact of OTT on TV Content Distribution Strategies
• OTT Video Market Tracker