A new study released today says that motivation in the US towards pay TV suppliers has been turned on its head, and that HD program provision and service quality no longer cuts it. In the current recession it’s all about value for money offers.
The study was released by researcher Heavy Reading at the Telco TV show held in Anaheim in California this week.
Already the results of US pay TV suppliers, especially Dish Networks, show the continuing cost of fighting customer churn with marketing and promotional expenses demolishing last quarter’s income. Well maybe they’re barking up the wrong tree.
The survey claims that it is the first to explore the mindset of pay TV subscribers since the credit crunch has hit the US, and is entitled ‘Making TV Pay.’ It finds that price of service and discounts are particularly important for attracting new subscribers.
‘Pricing and discounts dominate the decision process for new customers. Features, content packages and HD are secondary decision drivers for new subscribers considering switching to a new provider’, said Adi Kishore, Senior, Heavy Reading Analyst. ‘This would suggest that marketing campaign’s without a discount kicker will not be effective in driving new subscriptions’.
The study also finds advanced applications such as (VOD, DVR, HD) are valued by subscribers but don’t appear to be attracting new subscribers to a provider and there does not appear to be a significant preference for any type of provider (cable/satellite/telco) when respondents consider switching.
The report also claims that satisfaction is high across most parameters, but significantly lower when asked about price of the service. For the most part the survey suggests that churn is slowing, and that as of now a significant percentage of subscribers show no interest whatsoever in switching providers. Well that will come as a huge relief for Dish, given that last quarter it recorded its highest quarterly churn in any recent year. However that doesn’t make this survey inaccurate, because its fair to say that Dish is a special case. There may be a huge number of AT&T customers holding off subscribing to Dish until the new deal with DirecTV comes into place, and many existing AT&T customers may be trying to exit either of the offers ‘ one purely with Dish and the other which AT&T offers bundled with other services, which it is closing down.
So perhaps this survey serves to highlight attitudes going forwards and points clearly to a savage and unavoidable price war. Actually NOW is the time for a price war, and each side of that war will attack it in a different way. AT&T and Verizon MUST begin to offer clear unequivocal 4 way bundles, which are designed to preserve existing fixed lines and retain the wireless ARPU, at the expense of other services. Cable operators must be looking for a swing in their favor on broadband revenues but installing very high speed DOCSIS 3.0 services and offering it at prices down around the same level as existing telco offerings. Their voice services could potentially go to zero for introductory offers and other services such as VoD should be used to sweeten bundles, again with zero introductory pricing.
That puts in stark contrast the statements this week by AT&T that it has finally rolled out is IPTV U-verse home DVR system to every region, ahead of schedule. If this survey is right, such as move won’t bring AT&T hardly any extra customers and the company should have opted for an old fashioned price cut instead. At least whole home DVR has gone in as a free extra, so it will have some appeal.
AT&T has spent a fortune on Total Home DVR and says it is unmatched by any cable provider and just added ten new areas at Bakersfield, Dayton, Green Bay, Jacksonville, Little Rock, Miami, South Bend, Tulsa, West Palm Beach and Wichita.
The truth is that there is either going to be an all out depression or what the US is going through is a brief artificially induced recession. Either way for at least the next 6 months, and potentially for far longer, share values are gong to be tough to maintain. These companies might as well use that time to slim their margins and attract more customers, which will hopefully be loyal after the recession. After all they have all made either warnings, or at least acknowledged that trading is difficult, so their share prices are all adrift.
That means that ARPU, which has for the most part been rising on the recent quarterly results, will begin to fall as pay TV operations attack churn.
According to this survey customers are taking decisions on price, channel choices, dependability, and customer care. Oops, that puts the Cable companies in the worst position, with rising prices and legendary customers ‘don’t’ care.
Secondary drivers are said to be advanced services such as DVR, VOD, Interactive TV, and HDTV.
Outside of the US there is the additional issue of free to air digital terrestrial services emerging and this has already taken its toll on pay TV uptake.