FRONT OFFICE BY MARY COLLINS

Gen Y’s Latest Trend: Cord Cutting

A growing number of young adults born between 1980 and 1995 — Gen Y — are purchasing over-the-air antennas to watch television programming. Gen Ys are inherently more adept at, and prone to, experimenting with alternative forms of viewing TV content; they are less likely to accept the need to subscribe to subscription-based pay TV once they’re free to make their own decisions about it.

We’ve been hearing that off-air antennas are making a comeback. But what we may find surprising is that it’s not the generation that grew up with them who’s buying.  A growing number of young adults born between 1980 and 1995 — Gen Y — are purchasing over-the-air (OTA) television equipment to watch television programming.

That’s one of the findings of a research study entitled Must Choose TV: What Gen Y thinks about Pay TV and Cord Cutting conducted by Ideas & Solutions! Inc. The results of the study were shared by Glen L. Friedman, the firm’s president and founder, during a recent conference call with members of MFM’s Cable and TV committees. Friedman knows the subscription industry well. The 25-year veteran has worked with and for companies involved in satellite radio, cable programming and broadband Internet. 

His firm’s research set out to test the notion that, rather than being a phenomenon tied to a poor economy, the number of cord cutters, cord shavers or cord nevers would continue to grow even once things got better.

The growing use of OTA antennas by members of Gen Y who have cut the cord is just one of the findings that struck me from Friedman’s summary of his firm’s research. Following are a few others that I think you’ll agree are worth sharing:

When it comes to their cord-cutting behavior, young adults typically fall into one of four profiles. Thirty-three percent are what the Ideas & Solutions! study calls Loyalists. They have not considered cutting the cord. Loyalists prefer bundled content and they like having their viewing options in one place. 

This group is generally older, has a higher income and its members are more likely to be out of school and more settled into their living situations. They tend to spend more time watching TV than interacting with online content and they have less Wi-Fi access.They also prefer HDTV programming, watching sports and/or reality programming, event TV and scripted TV shows. In addition, they are more interested in watching TV in real time and they like the “stumble factor” that they can experience from a cable subscription, which allows them to discover shows through channel surfing and searching.

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Twenty-nine percent are characterized as Leaners. While they are undecided about cutting the cord, 55% of Leaners report having already considered it. Almost half of this group says they would choose a la carte entertainment options if the costs were the same as subscription pay TV.

This group is also more conversant with technology and alternate media options. They are less settled than Loyalists, representing a mix of living situation, income and work/study schedules. Compared to their peers, leaners appear to be more interested in convenience and control than in features or cost benefits.

Eighteen percent are what Ideas & Solutions! Inc. calls At Risk. This segment of Gen Y has the highest potential to cut the cord, entirely or in part. Most of them have already considered cutting their subscriptions and they prefer to consume content a la carte. Many of the individuals who are most at risk of cutting the cord watch less TV than their peers, already watch video content online and are more likely to own an iPad, have a Wi-Fi connection and subscribe to Netflix.

In addition, they are more likely to view cable TV as a luxury and are overall more cost-conscious. While they find cable TV is entertaining and convenient, they also view it as being expensive and wasteful. Many of these respondents also expressed negative perceptions of cable. From a lifestyle perspective, they are more likely to live alone and work or study in the evenings, leaving less time for TV.

The remaining 20% are called Non-subscribers. According to Friedman’s research, one in five members of Gen Y falls into what he calls the Evaders or Defectors category. As you might suspect, Evaders are those who have never purchased subscription-based pay TV and Defectors are former subscribers who have cut the cord.

Gen Ys are inherently more adept at, and prone to, experimenting with alternative forms of viewing TV content; they are less likely to accept the need to subscribe to subscription-based pay TV once they’re free to make their own decisions about it.

A cost versus value equation plays a pivotal role in determining whether Gen Y’s will pay for cable or satellite service, athough freedom of choice does play a part.

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Online services such as Netflix and Hulu, supplemented with TV network websites and digital antennas appear to provide sufficient content for many to cut the cord. The research found that nearly 50% of At Risks use Netflix and Hulu.  While the group categorized as At Risk by the research stands at 22% of total pay TV subscribers, they represent 30% of the universe of Netflix and Hulu users. 

When the research compared Netflix use between Loyalists, Leaners and At Risks, it found that Netflix use, especially among individuals subscribing to both the basic and Instant services, appears to serve as a gateway to eroding loyalty to pay TV.

Consistent with their preference for online viewing, Leaners and At Risks are much more interested in a personalized viewing experience. They like the tailored recommendations and content available to them when and where they would like to view it.

TV Everywhere has the potential to retain subscribers.

At Risks are open to the role TV Everywhere can play as a subscriber retention tool. As one respondent observed, TV Everywhere “sounds like the link between the Internet and TV that I’ve been looking for.”

One key obstacle that needs to be addressed before TV Everywhere can be successful is the low awareness overall among the survey participants. The research also found that TV Everywhere was not likely to win back Defectors.

Summarizing the overall message of the research, Friedman told our group that while cost is the leading driver of cord cutting among young consumers, there are issues that will outlast the current need for belt tightening. “A sense of viable alternatives, coupled with a perceived lack of value in the benefits of pay TV, also plays a major role,” he observed. “Young consumers’ penchant for alternative platform viewing will forever alter the pay TV landscape.”

But the loss of At Risks and Leaners to cord cutting is not a foregone conclusion. Subscription-based pay TV has a future with young consumers.  Friedman uses the same findings to identify how cable companies and other can move more of the 18-35 year-olds into the Loyalist category. As he noted, Gen Y’s value the convenience, variety and “stumble factor” of cable and satellite. Moreover, “pay TV services could win back those who’ve cut the cord with the right positioning, product mix and communication. He concluded by saying: “Engagement strategies must be carefully tested because young consumer desires aren’t necessarily in line with business realities of subscription-based pay TV companies today.”

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The findings reminded me of a suggestion that Jason Basinet, media analyst for Citigroup, shared with attendees at least year’s annual MFM/BCCA conference. Noting that many members of Gen Y find themselves in shared living situations, as validated by this latest study, Basinet suggested that cable MSOs and others explore augmenting their household-based subscriptions with user-based options.

It’s also important to address the role of broadcasters in helping to limit cord cutting activity. While OTA viewing can provide a figurative lifeline for broadcast TV viewership, it won’t provide a connection to retransmission revenues, which are becoming increasingly important to a station’s financial health. When it comes to cords, retransmission consent is one of the business realities that binds the future of cable operators and broadcasters alike.

The implications of cord cutting will be among the topics we’ll be addressing at Media Finance Focus 2012, the 52nd annual conference for MFM and its BCCA subsidiary. This year’s conference, which will be held in Las Vegas, May 21-23 is appropriately themed “Stacking the Deck in Your Favor.”

More information about the event may be found on our website at www.mediafinance.org.  I hope you will consider joining us. Similar to last year’s conference, it will be one of the places where we can discuss and identify strategies that will help to ensure TV trends such as cord cutting don’t end up stacking the deck against us.


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.


Comments (13)

Leave a Reply

lynnette zaner says:

February 3, 2012 at 9:18 am

Guess I’m a Defector!

Marilyn Hyder says:

February 3, 2012 at 9:47 am

Cable has turned into an endless sea of sleaze with Sister Wives, Kardasians, Toddler’s and Tiaras, Ax Men, Dog Bounty Hunter and on and on.
.
Here’s a fact from Nielsen, that’s worth a story:
.
In all of the 2010-2011 TV season, other than a few ESPN football games, there was not one cable program–let me repeat that–not 1 cable program–that appeared in the top 100 TV Programs. (Source: The Nielsen Company, 9/20/10-5/25/11; Programming under 25 min. excluded; Ranked by AA% (ratings); in the event of a tie, impressions (000’s) are used as a tiebreaker.)

robert russo says:

February 3, 2012 at 10:03 am

The generally excepted term is millennial – not “Gen Y.” And even if for some stretch that was right – the word “generation” would be spelled out.

    mike tomasino says:

    February 3, 2012 at 10:11 am

    Millennials are 1995 on, and since the oldest of them are 17, they don’t count yet. Generation Y was 80-95, and I’m a oldster in Generation X (65-80).

Christina Perez says:

February 3, 2012 at 10:17 am

Over the air DTV is addressable — that is, authorities who know the chip registration number of individual sets or DVT converters can control access to specific channels, or even override commercial signals in the event of an “emergency” (use of quotes sardonic). I have re-scanned and then I receive strong signals from certain channels — and then, the desired channel disappears and I get the “no signal” on-screen message. Circumstantial evidence and other research leads this journalist to conclude that a major military “cyber security” contractor has operational command and control of this mechanism and is maliciously interfering with over the air TV reception of so-called “targeted individuals” — many targeted for their politics, backgrounds, or for reasons of blind hate. Or maybe operatives are being paid off by the big fish to limit access to competing channels.) There is evidence that this entity is using broadcast DTV to deliver subfrequencies that cause physical discomfort, even pain, to “targeted” families. Before you dismiss this journalist’s conclusions, read these two articles:
http://nowpublic.com/world/now-theyve-weaponized-digital-tv-or-so-it-seems
http://viclivingston.blogspot.com/2011/12/u.html

    Tanya Pavluchuk says:

    February 3, 2012 at 10:40 am

    Are you high?

    Christina Perez says:

    February 3, 2012 at 10:43 am

    I aim high and on target.

    alicia farmer says:

    February 3, 2012 at 12:17 pm

    Wow! You are a sick puppy Philly.

    Christina Perez says:

    February 3, 2012 at 12:28 pm

    It is your apparent military contractor blog-spamming that is sick — and a fraud on U.S. taxpayers.

Matthew Craft & David K. Randall says:

February 3, 2012 at 2:26 pm

Focusing again on the actual topic of this commentary, the studies cited suggest that broadcasters have an opportunity to leverage renewed interest in over-the-air reception to maintain or even grow viewership, at least among the “Gen Y” demographic. That’s only going to happen with new and targeted promotional efforts to drive these viewers to specific shows. In effect, broadcasters should also push the notion that Netflix is for cable.

    Catherine Lanucha says:

    February 3, 2012 at 6:24 pm

    Why would you push Netflix to cable?

Dakota Gainer says:

February 21, 2012 at 10:35 pm

I have to agree that TV Network sites with free episodes make it a lot easier to ‘cut the cord’, and now sites like FreeCast.com are making it even easier to access the network content by bringing it all to one place. It’s tough to justify paying a monthly subscription when you can easily get most of the same content online for free online.

    Dakota Gainer says:

    February 21, 2012 at 10:36 pm

    *the same content for free online.


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