A report from US market researcher Pike & Fischer, reckons that most US homes are planning no cutbacks in Pay TV subscriptions in 2009, despite the recession. But perhaps they should have done a little more thinking, because their results look fairly disastrous for cable in our view.
Around 70% of the consumers responding to the survey, said they plan to keep their current cable or satellite TV service this year. Only two of the 600 respondents to the survey, conducted in March, said they plan to drop their multichannel video service to cut household expenses.
While that headline is designed to keep pay TV operator share prices up, the fact that almost 15% of respondents said they planned to downgrade to a lower-priced subscription by giving up on premium channels, perhaps tells the other side of the story. Around 8% said they might upgrade, making the overall swing a negative one, especially for cable. Cable operators have hardly increased their customer base for the past five years, mostly staying on static subscriber numbers or only increasing them through acquisition. Their entire investment rationale has depended on existing customer taking extra services such as VoD, HD, additional gaming or music services, broadband or voice services. If only 8% of respondents were to upgrade in any way, then cable would be in trouble and all financials for the big cable operators – Comcast, Time Warner Cable, Cablevision, Cox and Charter ‘ would enter a downward spiral.
Only a market research company could take such bad news and wrap it in such a positive headline
Luckily consumers rarely behave as they say they will when speaking to marker researchers. We are sure that higher numbers than that will be tempted by HD offers and special bundles, and additional services and that many of the people that feel they should reduce their subscriptions will never get around to it.
Pike & Fischer went on ‘Although there are no signs yet that the Web is on its way to replacing traditional TV, a substantial number of respondents said they are turning to the Web to watch video. About 32% said they regularly watch video from Web sites such as YouTube and Hulu.
‘The results indicate that consumers appear to be willing to continue paying for cable or satellite TV, despite the fact that they can get a vast amount of shows for free or very low cost on services like Hulu and iTunes,’ said Scott Sleek, director of P&F’s Broadband Advisory Services. ‘But they don’t appear to be willing to spend any extra money for premium channels or on-demand movies. And they’re increasingly willing to go to the Internet to watch their favorite shows.’
Here the researcher has picked up on what is a long term trend that really will damage pay TV in the US, but consumers are yet to show they are ready for the big leap, which is finding whatever they want to watch on the internet, and it’s going to be a while, and possibly require some new service innovation, before that approach takes hold. However the young students who are watching most of their TV on a PC, are like a time bomb as they grow older and adopt new attitudes to entertainment.