Apple TV, connected TVs create more cord-cutting worries for pay-TV operators

That dark cloud on the horizon is the storm clouds building around the launches of Google TV and Apple TV, and like all good storms, it's kicking up some big winds in advance of it arrival. A new report from Strategy Analytics says that 13 percent of Americans "are very likely" to cut the cord to their pay-TV service in the next 12 months, and forecast that that number could be 20 percent or more in another 12 months.

The reasons? Value and choice.

"We just surveyed 2,000 American households," said Strategy Analytics researcher Jia Wu, "And we found that the perceived value of pay-TV is very low. In fact, only 20 percent said their service exceeds or greatly exceeds their expectations."

Wu said that, increasingly, consumers don't want to bundle services, they want to choose what channels they pay for. "Interestingly, 18 percent of the people we surveyed said that they would be willing to pay more to have a la carte. People want the flexibility of choosing what content they want, they don't want the crap."

Wu said that with the arrival of Apple TV and its rental service through iTunes, the potential for cord cutting to accelerate beyond the 13 percent mark is very real. Add connected TVs to the equation and up to 1-in-5 consumers might begin to consider dropping their pay-TV providers.

"With something like a Sony TV, you don't have to have a set-top box, you don't have to make any confusing connections, it's all right there," he said. "And, while older viewers might be slow to change their habits, younger users already are getting their content from other places than traditional pay-TV. It's just another shake out of the pay-TV industry."

Over-the-top delivery of content is something that younger Americans already have a lot of experience with, and they're likely to use it even more as they age.

Ben Piper, Director in the Strategy Analytics Digital Consumer Practice, said it's key that service providers not ignore the changing habits of younger viewers.

"Today's teenagers are tomorrow's customers," he said. "While it may represent only a relatively small percentage today, we anticipate the number of cord cutters to increase going forward."

Younger Americans consume and value content in a way far different from their parents' generation, and have little regard for how content is delivered, according to the report.

"Like the music industry prior to iTunes and the iPod, the online premium video market still lacks a perfect provider that can connect a service with a device to create a great user experience," added Wu. "With its new and improved TV product, Apple is now preparing itself to repeat the success it has had in the music business in the rapidly growing online premium video market."

Related articles:
Yankee Group says cord cutting will accelerate
Cord cutting: Numbers up, and accelerating as more turn to web
Report: Online video success forces strategic shift in cable, IPTV
Canadians turn to online video from Pay TV
Can TV Everywhere stop the cord-cutting trend?

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