Overall satisfaction with online video services drives cord cutting; costs operators in US >$1B

By Jim O'Neill on Oct 03 2016 at 8:45 AM
Overall satisfaction with online video services drives cord cutting

Customers using paid streaming video services like Netflix, Amazon and Hulu, or, skinny bundle offerings like SlingTV and PlayStation Vue, as well as programming apps like HBO Now are significantly more satisfied compared to pay-TV service providers, a new study says.

And, according to the study from J.D. Power, consumers who’ve used one of those services in the previous year are much more likely than those who haven’t used one — 14% vs. 4%  to cut the cord on TV in the next year.

Overall, satisfaction with SVOD, TVOD and virtual MVPDs is considerably higher than it is with traditional pay television service.

Cord cutting costs to operators: More than $1B

That’s more bad news for the pay-TV industry. Last week, it was reported that a projected loss of 800,000 customers to cord cutting over 12 months could cost the industry $1 billion in lost subscriber revenue, about $1,248 per customer annually (based on a $104/mo. pay-TV bill).

That projection, from consulting firm cg42, didn’t include the cost of reconnecting to cord cutters – the customer acquisition fee – which can cost as much as $800 per subscriber in waived fees, truck rolls, marketing expense and promotional upgrades, increasing the potential cost to operators as they fight to re-connect with unhappy consumers.

Streaming actually saves consumers cash

And, according to the cg42 report, although some pundits have claimed an a la carte solution would cost consumers more than a basic pay-TV package, in reality consumers are spending far less, and are more satisfied with their streaming options.

Increasingly, consumers who have pay-TV service also have at least one additional streaming service, bringing their monthly bills to nearly $190, cg42 posited. It said cord-cutters spend about $83/mo. – including the cost of an Internet connection.

As Steve Beck, managing partner at cg42, told the Wall Street Journal: “The consumer is discovering they don’t need the mean, evil cable company to get the content that they want, and they can get it for a better deal.”

All isn’t lost for operators

The J.D. Power studies, meanwhile, three in all, said 44% of cord cutters are likely to upgrade Internet services and potentially might reactivate a TV service if operator services improve. (cg42, meanwhile, reported just 6% of cord never, just more than 1 million households, said they might subscribe, too.)

But, streaming providers currently outclass pay-TV in price, based on a 10-point scale, 7.99 to 6.42. As for performance and reliability, streamers again outscore pay TV to 7.98 to 7.82), programming (7.87 vs. 7.76) and billing experience (8.04 vs. 7.54) also goes to streaming services.

All of those factors play a role in the increasing migration away from legacy pay-TV services to streaming.

cg42 said 83% of cord-cutters say they don’t miss pay TV, and access almost all the content they want online. For those who miss sports, the most cited alternative is going to a bar or restaurant to watch.

Streaming adoption continues to surge, according to the reports. J.D. Power asserts that 63% of customers have used an alternative video service in the previous year, up from 58% in 2015. Additionally, 73% of customers who plan to cut the cord on TV service in the next year indicate they will use an alternative video service.

“This finding partly reflects age demographics since younger customers are more likely to use alternative video services than older customers, and younger customers are more satisfied with alternative TV service than older customers,” said Kirk Parsons, senior director and technology, media & telecom practice leader at J.D. Power. “Despite their higher satisfaction, customers who have used an alternative video service in the previous year are much more likely than those who haven’t used one—14% vs. 4%—to cut the cord on TV in the next year.”

J.D. Power said its 2016 U.S. wireline studies -– Residential Television Service Provider Satisfaction Study, Residential Internet Service Provider Satisfaction Study and the Residential Telephone Service Provider Satisfaction Study – were based on responses from 31,072 customers nationwide.

Stay tuned.

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