FRONT OFICE BY MARY COLLINS

Keeping Gen Y Viewers Through Innovation

More and more stations are expanding their presence on the Web and participating in the mobile DTV initiative. While the consumer’s ability to access news and sports via off-air broadcasts is cited as one of the drivers for cord cutting, the growing importance of retransmission consent revenues is a very compelling reason for stations to explore partnering with subscription TV providers and participating in their TV Everywhere initiatives.

This isn’t your grandfather’s television. Or is it? 

A recent Wall Street Journal story recapping the 2010-11 TV season reported there were fewer young people watching TV on traditional sets over the past television season, marking the second consecutive year of decline in the 18-49 demographic.

The article, “TV Networks See Key Audience Erode,” attributed the decline to younger viewers’ embrace of “a proliferation of ways to watch TV shows.” It went on to cite Nielsen data reporting that 25.1 million people between the ages of 18 and 49 watched live or recorded TV, which was down 1.4% from the 2009-10 TV season and 2.7% from two years ago.

A study released last week by Ideas & Solutions!, a Los Angeles-based consulting firm for media and technology companies, took a closer look into the behaviors of viewers in the 18-29 demo. As the study’s title, “Must Choose TV: What Gen Y Thinks About Pay-TV and Cord-Cutting,” suggests, it focused on behaviors among 18 to 29 year-olds who are the most likely to discontinue their pay TV subscriptions. However, it also provides some helpful insights on TV viewing by this traditionally important demographic.

On a troubling note, only 40% of respondents were deemed least likely to cut their pay TV. The remaining 60% of respondents indicated some propensity for “cutting the cord” to their pay TV subscriptions, according to the survey.

According to the study, those who considered “cutting the cord” were more likely to be early adopters of new technology, such as Hulu and Netflix, and displayed a strong desire to control their TV viewing by using a DVR as well as on-demand services.

BRAND CONNECTIONS

In commenting on the study, Glen L. Friedman, president and founder of Ideas & Solutions! Noted: “While the media has focused much of its reporting on the extent of cord-cutting overall, there is little mention of the behaviors and attitudes of vulnerable groups within this key constituency. This is the demographic that  completely transformed the music and the phone business and has already started to  dramatically reshape the pay TV ecosystem.”

Friedman, a veteran of both the MSO and programming sides of the industry, went on to say: “It’s not that the sky is falling, but it certainly warrants a lot of attention, and the subscription-based pay TV providers, along with the programmers who rely on them for distribution, should really invest the time and the resources to get to know this audience better.”

Part of that knowledge would include understanding the drivers for cord-cutting. Survey respondents who were most likely to drop their subscriptions indicated that the most unattractive aspect of subscription-based pay TV is its cost-benefit equation. In fact, 69% of what the survey terms “At-Risk” responders and 61% of the “Leaners” cited the expense as the main reason they would consider discontinuing their pay TV service. That reason was cited far more than “Other ways I can watch entertainment content,” which was given by 36% and 35% of the “At-Risk” and “Leaner” respondents, respectively.

The other side of the coin is the characteristics that contribute to the “stickiness” marketers so often talk about. The study found:

  • Fans of sports programming were much more likely to be loyal customers.
  • Convenience factors ranked as a major reason for many subscribers to keep their service. Viewers prefer paying their bills in a single lump sum and enjoy the “communal” aspects of pay TV, as well as the “stumble upon” experience of browsing the channels.
  • In qualitative interviews, many of those who have already moved away from pay TV said they may, in fact, return if their lifestyle situations changed and providers were more attuned to their preferences.

Not surprisingly, viewer interest in these benefits is driving some of the innovations that we’re seeing in the industry. At a keynote session at MFM’s recent Media Finance Focus 2011 conference, Turner Broadcasting System’s Andy Heller noted that while subscription TV remains one of the best entertainment values — “less than the cost of a ballgame,” the industry had been at risk of undermining that value by giving its programming away with commercial-free viewing often within just a few hours of its on-air debut.

Heller, vice chairman of Turner Broadcasting System,  a Time Warner company, said the industry’s move toward TV Everywhere was designed to preserve a business model that’s been working well for 26 years while addressing the interests of younger viewers. “This is a $100 billion-a-year business employing millions of people. Doing damage to that ecosystem would be a sin,” he told conference attendees.

In a Q&A session with Paul Maxwell, owner and CEO of Media Business, Heller said that tools such as Nielsen’s C3 ratings allow ad-supported networks and their advertisers to derive the benefits of viewership via DVRs, online, video on demand and other viewing alternatives that appeal to the younger demo.

The dual revenue stream for subscription television is also preserved, by using solutions such as “TV Everywhere” that limit access to these programs to paid subscribers.

“Services like iTunes have shown that consumers will pay for content; what they want is convenience,” Heller noted. “This [TV Everywhere] is rewarding them for bundling because the content is available to them across the entire bundle,” he added.

Time Warner’s “HBO Go” TV Everywhere service has a lot of company. Last month, the research firm Park & Associates predicted TV Everywhere services will be available to 81% of U.S. and Canadian pay TV subscribers by mid-2011. According to Brett Sapppington, a senior analyst at the firm, “service providers realize they need to be the consumer’s primary source of video content on all platforms.”

One of the first services, Comcast’s XFinity Remote, was unveiled at last year’s Cable Show. Growing demand for TV Everywhere has made it one of the major topics slated for Cable Show 2011, which will be held next week in Chicago.

With more 18-49 year-olds opting for the convenience of TV Everywhere solutions, where does that leave local broadcasters? The answer remains to be seen. As Cox Enterprises executive Sandy Schwartz told Media Finance Focus 2011 attendees: “Being under attack for our spectrum makes it really important to have a plan for our future.”

Schwartz presided over the company’s transformation from an organization that was media-based, with separate divisions for its newspaper radio and TV divisions, to one that is function-based. In markets like Dayton, Ohio, it has gone from having local media outlets compete with one another for news and advertisers to integrating some 13 local media businesses under one roof.

Like cable and pay TV networks, broadcasters participate in the “triple play” media environment. More and more stations are expanding their presence on the Web and participating in the mobile DTV initiative. While the consumer’s ability to access news and sports via off-air broadcasts is cited as one of the drivers for cord cutting, the growing importance of retransmission consent revenues is a very compelling reason to explore partnering with subscription TV providers and participating in their TV Everywhere initiatives.

As Sandy Schwartz observed, “We are in the best position to innovate. We have knowledgeable employees, engaged customers and relationships with advertisers.”

Is this your grandfather’s television? Yes. And with a commitment to the same innovation that has fueled its dominance over the past 60-plus years, it can continue be the medium of choice for every generation.

 


Mary M. Collins is president & CEO of the Media Financial Management Association and its BCCA subsidiary. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.