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VAB: Cord-Cutters Seek Savings, Not Better Content

Cord-cutters don’t have much spending money and they like watching TV shows, according to a new white paper from the Video Advertising Bureau that tries to minimize the threat posed by streaming video.

The VAB—a trade organization representing the cable industry and the broadcast networks—calls its paper “Disconnected Reality: Untangling the Great Cord Cutting and Streaming Misperception.”  It seeks to provide an answer to the question of what impact cord cutting has on the TV/video ecosystem, and what that means for marketers.

“What many in the media business have automatically interpreted as a statement of content preference turns out to be simply a cost-cutting measure,” the paper concludes. “The majority of cord cutters and cord nevers cannot afford multichannel TV subscriptions. These people are not targeted consumers for many of the most advertised products on TV today.”

It adds that the consumption of streaming video is not a young generation fleeing TV content. “It is predominantly TV fans adding flexibility and dimension to their video viewing. TV shows remain the vast majority of streamed programming, while MVPDs are fast expanding their exclusive catalogs of video on demand,” the report says.

The paper says consumers will go where the content is, and with TV networks spending more than $50 million on programming in 2017, those networks and the MVPDs “are poised to continue creating the center of the video universe. This is why the growth of broadband-only homes has slowed in recent months, and even four out of five cord cutters say they would prefer a multichannel TV subscription.”

The paper pulls together research and statistics from a broad array of sources.

It says that the people who are cutting the cord aren’t tech-savvy millennials, but low income people, both young and old, who are dropping cable to save money. Citing figures from SNL Kagan, the paper says 59% of cord-cutters are households with income of less than $50,000, and 29% of those households earn less than $25,000. Only 10% earn more than $100,000.

For all the awards and acclaim racked up by Orange Is the New Black and Transparent, the vast majority of what they stream is TV content licensed from the networks and they’d prefer to have a pay-TV subscriptions because it gives them a wider array of content they want. Most streaming is down by a small number of viewers with 9% of streamers watching 87% of the content consumed. 

The cord-nevers also come from low income household, with 68% earning less than $50,000 and 38% earning less than $25,000. While 40% are millennials, 41% are boomers or seniors.

Cord-cutters would prefer to have pay-TV subscriptions someday. The paper sites a study from Kagan saying that many millennials are becoming multichannel subscribers as they gain a higher income. Importantly for advertisers, TV holds a huge lead in reach and time spent viewing, according to research from Nielsen. And the reach will increase as both cable VOD and TV Everywhere continue to gain traction. 

(Photo via Ervins Strauhmanis's FlickrImage taken on Sept. 19, 2014 and used per Creative Commons 2.0 license. The photo was cropped to fit 3x4 aspect ratio.)