Video Advertising Bureau: 'Majority of cord cutters and cord nevers can't afford pay-TV'

The Video Advertising Bureau said cord cutting is being caused by consumer economic conditions and not an emerging avalanche of direct-to-consumer video choices.

The 625,000 people who canceled their pay-TV subscriptions in the second quarter, the VAB said, were primarily in lower-income homes, featuring not just millennial residents, but older folks, too. The org said that 59 percent of cord-cutting households have annual incomes of less than $50,000

"What many in the media business have automatically interpreted as a statement of content preference turns out to be simply a cost-cutting measure," said a white paper from the cable-industry backed org, which changed its name from the "Cable Advertising Bureau" in May. 

"The majority of cord cutters and cord nevers cannot afford multichannel TV subscriptions," added the white paper, titled Disconnected Reality: Untangling the Great Cord Cutting and Streaming Misperception. "These people are not targeted consumers for many of the most advertised products on TV today."

Citing a range of research sources, including SNL Kagan, the VAB said that use of streaming video by younger consumers is additive to their overall TV consumption, not an alternative to linear use.  

Streaming, the group said, "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."

With TV networks set to spend more than $50 billion on programming in 2017, the group added, networks and pay-TV operators are poised for a surge in video consumption. 

"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 VAB said.

In a separate study released last week, Strategy Analytics also found that lower-income homes are more likely to dispense with pay-TV services. However, the research firm found that pay-TV operators are working harder these days to keep higher-income "triple-play" customers and are more willing to cut ties with lower-margin customers.

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