Skip to main content

Why Subscribers Downgrade Pay-TV Service

Pay-TV service providers have reached a crossroad -- either way, business as usual is not an option. Over two-thirds of American pay television subscribers would be willing to switch providers if offered a price discount of 20 percent, according to the latest market study by Strategy Analytics.

While Cable TV customers were the most likely to churn, only half as many (33 percent) of Telco IPTV subscribers are eager to change providers. Their report, "Digital TV Customer Satisfaction: U.S. Survey Results 2H'09," is the result of polling 856 digital pay television subscribers within the U.S. marketplace.

Overall, respondents reported satisfaction with their current digital television provider, with 71 percent claiming to be "somewhat" or "very" satisfied. There was a marked difference, however, among access platforms. Telco IPTV customers reported 95 percent overall satisfaction, compared to 78 percent for Satellite, and 67 percent for Cable.

Highly Volatile Market Dynamics
That said, fewer than 22 percent of subscribers -- irrespective of the pay-TV platform -- believe they were receiving "value for money". Meaning, the vast majority believe they're paying too much for what they receive -- with the price typically rising, as the experience continues to decline (due mostly to the frequency and irrelevance of TV advertising).

"The value-for-money result was perhaps the most important finding of this study," noted Ben Piper, Director of the Strategy Analytics Multiplay Market Dynamics service. "It underscores a trend we have been seeing for the past 18 months -- a growing number of customers are beginning to question the value of a traditional pay-TV subscription in light of expanded over-the-top offerings, such as Hulu and Netflix."

While Telco IPTV is expected to make strides in the upcoming years, the platform's success is certainly not a foregone conclusion, according to Piper's assessment. In a highly penetrated market such as the United States, growth will not be organic. In fact, the market is destined for a major shift, once consumers discover the low-cost alternatives .

Moving Beyond Myopic Market Segmentation
Meanwhile, I believe that industry analysts now must move beyond measuring the cord-cutting phenomenon -- where traditional pay-TV subscribers totally terminate services -- and instead start to acknowledge the growing market segment(s) of service down-graders.

A growing number of traditional pay-TV subscribers are dropping premium channels and downgrading to basic service tiers. They do this after subscribing to alternative sources of movies and premium TV series (Netflix in particular), then they discover the free over-the-top (OTT) "Instant Play" video streaming offerings, and the ease of creating a personalized video play-list (Netflix queue).

Granted, some Netflix subscribers will quickly evolve to unsubscribing from pay-TV basic service tiers, after they install an external or attic-mounted antenna to receive high-quality digital broadcast TV signals for local programming. But, this segment is currently at the extreme end of the spectrum.

We need a comprehensive segmentation study that will uncover why subscribers downgrade pay-TV service, and the various stages of their progression to abandon traditional pay-TV. Then, we'll have a full understanding of this disruptive transition to OTT service offerings.

Popular posts from this blog

Artificial Intelligence Growth at an Inflection Point

Business technology investment no longer follows a predictable path to growth. The global venture capital (VC) investment in artificial intelligence (AI) was close to its peak in 2021 reaching $22.3 billion, according to the latest worldwide market study by ABI Research. This is just $400 million shy of the historical high of $22.7 billion recorded in 2019. Compared to the $15 billion recorded in 2020, the market made a remarkable recovery, with a 48.5 percent year-on-year growth. Will the future AI marketplace return to stable growth, or will it remain volatile? Artificial Intelligence Market Development "COVID-19 greatly accelerated the speed of digital transformation within the enterprise. Businesses are looking for solutions to work processes automation, customer care, due diligence, transcription and translation, and sales and marketing enablement tools," said Lian Jye Su, research director at ABI Research . At the same time, COVID-19 led to the Great Resignation of 2021

How a Digital-First CEO Leads Transformation

Some leaders reject the notion that "wait and see" is the best response to disruptive change. Savvy senior executives are already driving digital business transformation throughout their organization in an effort to gain a bold strategic advantage. According to the latest market study by International Data Corp (IDC), Digital-First CEOs plan to drive at least half of their income from digital business products, services, and experiences by 2027 -- that's ahead of the market average of 39 percent. Driven by their response to the COVID-19 pandemic, these business leaders have changed how they think about the relationship between business and technology, and how they approach the next digital transformation era -- from scaling digital technology to guiding a viable digital business. Digital Business Market Development IDC defines digital business as value creation based on technology, which entails: 1) Automated customer-facing processes and internal operations; 2) Provision

Digital Solutions for Industrial & Manufacturing Firms

Executive leaders of fast-moving consumer goods (FMCG) are seeking guidance on how to apply new business technology in their manufacturing operations. CIOs and CTOs are tasked with gaining insight into the best solutions for digital transformation. ABI Research evaluated the impact politics, regulation, the economy, supply chain, ESG, and technology are having on FMCG, pharma, producers of steel, chemicals, pulp and paper -- as well as the mining and oil & gas sectors. Digital Transformation Market Development "Our assessment found that the FMCG sector is under pressure from all sides," says Michael Larner, industrial & manufacturing research director at ABI Research . Securing raw materials is challenging considering lockdowns in China and limited grain supplies from Ukraine. Supply shocks are raising input costs, and operating costs are rising with higher energy costs coupled with the pressure to pay higher wages and work sustainably. "We all hoped that with th