Cord-cutting is not being driven by millennials because they consume media differently, but rather by people with lower household incomes who feel they just can’t afford pay-TV. This is the main finding of a new study by researcher Mintel as reported by Advanced Television.
According to Mintel's research, only six percent of households with an income over $50,000 have cut the cord, compared with 18% of households earning less than $50,000. And the majority of these households -- including those who do currently subscribe to pay-TV -- feel they can’t afford it.
The research also found that the same percentage (10%) of each age group (millennial, gen X and baby boomer) said their household did not subscribe to pay-TV, supporting the thesis that income rather than age is the key driver for cord-cutting.
Mintel also found that only about a third of those cord-cutters have actually cut the cord, i.e., had a pay-TV service at some time in the past. Two thirds are "cord-nevers," i.e., they have never subscribed to a pay-TV service.
Nor can OTT video services be blamed for cord-cutting, according to the researcher, since households that have pay-TV are in fact more likely to subscribe to multiple OTT video services. Among those who use even one source of online video content, pay-TV penetration is 85%. This actually rises as more OTT services are used, with 98% of those using six or more sources of online video also subscribing to pay-TV.
Non-subscribers are going back to basics; with the majority of them (56%) receiving over-the-air broadcast signals. This is about four times the equivalent percentage for US households as a whole.
Mintel's study is interesting, in that it challenges a fairly widely-held belief in the video business: that younger viewers consume their content differently, and that's why they won’t pay for a cable subscription. Instead, it's really about affordability -- the steadily rising pay-TV prices have led to lower income subscribers simply being priced out of the market regardless of their age segment.
The past decade has been one of the worst in history in terms of economic challenges, and spiraling prices for any commodity or service will result in a shrinking market. Pay-TV is expensive, and people have had to cut back on something.
In the past, pay-TV was the common man's luxury: if you couldn't afford a holiday, you could at least spend an extra fiver a month on a kids' cable package to make it up to the children. But the growing cost breached some kind of tolerance threshold a few years ago, and that has heightened price sensitivity and a tendency to just pull the plug.
At the same time, it's difficult to entirely dismiss preferences for personal devices among younger viewers, as well as a more strident desire for consuming video content off-schedule. I suspect strongly that cord-cutting is a result of several factors: new consumption behaviors and the availability of new OTT options as we believe, but also the crossing of a price threshold, where consumers are just refusing to pay any more.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation