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Report: ‘Cord-Cheaters’ New Threat to Pay-TV Operators

3 Sep, 2013 By: Erik Gruenwedel

Increasing numbers of pay-TV subscribers seek on-demand content from third-party sources such as Netflix and Redbox rather than their cable, telco or satellite TV provider

Multichannel video program distributors increasingly deal with “cord-cutters” and “cord-nevers.” Now they have a new threat to their ecosystem: “cord-cheaters,” according to a new report from Digitalsmiths.

“Cord-cheaters” represent pay-TV subscribers who opt for third-party video services include Netflix, Redbox, Hulu and Amazon Prime Instant Video for on-demand content rather TV Everywhere platforms offered by their pay-TV operators.

Indeed, 68% of smartphone and tablet owners surveyed have not downloaded their pay-TV provider’s app; 35% have a subscription to a third-party subscription video-on-demand service; 22.1% regularly use a third-party transactional VOD service; and 73.8% never purchase from their pay-TV provider’s VOD catalog.

The survey included 1,850 respondents in the United States and Canada during the second quarter.

Thirty-five percent of respondents use subscription OTT services to view video content, and 55.5% of this group spends between $6 to $11 a month, a 12% increase over Q1 2013 survey results. Netflix alone experienced a nearly 5% increase in adoption (to 28%) over the previous quarter.

Other sources included Amazon Prime Instant Video (7.5%), Hulu and Hulu Plus (6.3%), Redbox Instant by Verizon (2.5%) and Blockbuster @Home (2.4%).

Interestingly, among MVPDs, Cox Communications had the highest penetration of Netflix subscribers (42.2%), followed by Time Warner Cable (41.8%), Charter Communications (35.1%), Dish Network (32.7%), AT&T U-verse (31.6%), Verizon FiOS (29.6%), Comcast (27%) and DirecTV (25.7%).

Canada’s Rogers Communications had 22% Netflix penetration.

“Survey respondents cited convenience [followed by price] as the top reason for using third-party video services, which went up an alarming 14.7% from last quarter,” the report reads. “The results show an increase in the number of respondents choosing third-party video services due to the ability to watch content on an iPad or tablet. Today, most pay-TV providers have apps that support tablet viewing, but the majority of subscribers don’t even know they are available.”

Meanwhile, more than 65% of respondents do not subscribe to any monthly movie or TV show rental service.

Separately, 22% of respondents use third-party rental transactions, with Redbox kiosks the clear winner at 12.4%. And 48% of this group spends $3 to $11 a month, which is a 13.8% increase over Q1 results.

Indeed, among MVPDs, 21.4% of DirecTV subs use Redbox; 21.1% among AT&T U-verse subs; 20.6% at TWC; 18.9% at Charter; 17.8% at Cox; 15.9% at Dish; 14.8% at Verizon; and 13.5% at Comcast.

Other transactional VOD sources included iTunes (6.4%), Amazon Instant Video (5.8%), YouTube channels (1.8%), Vudu (1.3%) and CinemaNow (1%).

Nearly 78% of respondents do not use a transactional VOD service of any kind.


About the Author: Erik Gruenwedel

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