TiVo did a large market survey at the end of last year that, among many questions asked cord cutters why they cut the cord. Respondents were allowed to choose more than one response, with the responses as follows:
- Too expensive 80%
- Use an Internet streaming service 48%
- Use antenna to get basic channels 27%
- Like to binge watch entire seasons 19%
- Dropped cable when moving 13%
- Like the streaming original content 11%
Interesting to me personally was that my number one reason for cutting the cord was not even on this list. I’ve found that I can no longer tolerate watching linear TV. I generally am multi-tasking when watching video and I love the ability to pause, re-wind or watch video in a manner that suits my mood at the moment. I can absolutely not stand commercials any longer, and that means I can’t stand broadcast cable. I tolerate commercials when watching sports, but I will not otherwise willingly watch anything that includes ads. The same goes for me for any web site that wants me to watch an ad first – I just skip past the site regardless of how interesting I might have found the content. I know there are ways to skip ads on linear TV using DVRs to record shows, but it takes more work and doesn’t work for channel surfing. Netflix and other OTT providers have let me just forget about ads.
But I’d like to look deeper at the primary reason people list for dropping cable TV – the cost. Certainly there are households who feel like they are getting priced out from being able to afford cable TV after each large annual rate increase. Real household incomes have not grown much for many years while cable rates have risen 6% to 7% each year. And so there are some households that are forced to give up cable when the alternative is not paying for something more important like rent or a car.
But I don’t think that is what most people mean when they say that cable costs too much. Most cord cutters are not dropping cable because they can no longer afford to pay the monthly bill – rather, what they really don’t like is the perceived value of cable. And value is something very different than cost.
We conduct customer surveys at CCG and I think the big national surveys are not digging hard enough with the questions they ask. I don’t fault them for that because the TiVo survey was not just asking about cord cutting, but also about a whole other range of issues related to video. Our surveys are generally being conducted in small town or rural markets where one of our clients is considering building a new network. And in these surveys we can dig a little deeper because we are trying to answer a much smaller range of questions.
For instance, consider rural homes and farms in areas with little or no broadband. People without broadband in these areas generally watch cable TV using satellite service since that is their only option. We don’t see much discussion about cord-cutting in these markets, because that would means cutting your home off from almost all video. In rural areas you might be able to get a few channels through an antenna, but sometimes that’s even very limited.
But today the majority of people with broadband have tried one or more of the streaming services like Netflix or Amazon Prime. In doing so they are finding that they love the amount of unique content on these sites and they love the commercial-free streaming experience. And the more they like the streaming video experience, the less value they perceive in their linear cable TV subscription.
I think every cord cutter is happy to be saving money, and that is why they would pick that choice out of a list of reasons for why they cut the cord. But I really think that most of them really mean that they could no longer justify paying the high price for something that they no longer value as much as they did in the past.
In economic terms streaming video is now becoming a substitute for traditional TV. Since cable systems were built in the 70s the only real substitute for cable TV was rabbit ears and a big majority of homes opted to get more channels and more chose through a cable subscription. But as homes perceive streaming video as a substitute for a cable subscription they will do the side-by-side comparison and decide that cable TV costs more than what it’s worth to them. And I think this is what would prompt most cord-cutters to say that cable is ‘too expensive’ when given a survey.