A Third of Pay-TV Subscribers May Cut the Cord

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It is no surprise that most Americans do not like their pay-TV service, whether it is delivered by cable or satellite. According to the latest report from the American Customer Satisfaction Index (ASCI), subscription-TV companies are tied with Internet service providers for the lowest customer satisfaction score among all industries. ASCI attributes pay TV’s lowly status to poor customer service and high prices.

So are consumers mad as hell and not going to take it anymore? Nearly a third are considering it, according to a recent report from Digitalsmiths, a TiVo company, on video trends in the first quarter of 2015. Some 32.4% of all current cable, satellite and Internet (IPTV) video subscribers say they are “on the fence” about keeping their subscriptions. The Digitalsmiths survey found that nearly 60% of pay-TV subscribers are paying more than $100 a month for bundled services.

The availability of more limited services like Sling TV from Dish Network that have a more limited selection and a much lower price is becoming more widely known among consumers. Among subscribers, 4.8% are planning to dump cable/satellite service altogether, 3.1% plan to cut the cord and switch to an online service, and 7.4% are planning to change pay-TV providers.

When asked what services they added or deleted, 36.4% said they added premium channels like HBO, while 44.1% said they cut premium channel services. Some 14.3% added premium sports channels, but 17.2% cut them. The big gainer: Internet service, which 32.3% of pay-TV subscribers say they added, while only 7.5% said they dropped Internet service.

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The Nielsen Company published a report in May 2014 noting that an average American watched just 17 channels out of an average of 189 available choices. According to Digitalsmiths, that has not changed:

On average, respondents chose 17 channels to make up their ideal lineup. Next, the survey asked respondents what is the most they would pay for this ideal lineup? The average price was $38 a month.

Three of the top four choices are the traditional broadcast networks ABC, CBS and NBC. Rounding out the top five are the Discovery and History channels.

Interestingly, ESPN, the top-rated sports network, ranked only 20th, behind House & Garden TV, TLC and FX. Only about 36% of subscribers would include ESPN in their own a la carte package. Fox Sports and NBC Sports Network would be included in about 21% of subscriber-selected programming. Yet sports packages command the largest portion of a pay-TV bundle.

Without specifying how many channels should be in an a la carte package, 23.5% of subscribers say the most they would be willing to pay for a personal package is up to $20 a month. Another 51.3% say the most they want to pay is $50 a month. That is three-quarters of subscribers who want to pay no more than $75 a month for video services. Right now less than 25% of pay-TV subscribers pay less than $75 a month for service, and 59.8% pay more than $100 a month.

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The short version of the story is that American consumers believe they are being ripped off by pay-TV providers. The subscriptions include literally hundreds of channels no one ever watches. Those channels just make it more difficult for subscribers to find what they want to watch. Paying for something they do not want at the same time that they cannot find something in the jumble that they do want are the two factors that are driving consumers away from pay TV.

Even though the pace of cord-cutting is picking up, there are still tens of millions of Americans who continue to pay the subscription fees. The pay-TV industry does not look like it is going to die any time soon, but a tipping point is on the horizon, and when we reach it the pay-TV companies cannot say they weren’t warned.