Are OTT analysts asking the right questions of consumers?

A few months ago I roughed out an outline of what consumers might end up saving -- or spending -- if they decided to cut the cord. The article caught some attention and got people thinking and commenting about whether my admittedly unscientific calculations were realistic. Some felt that the sample price outlay didn't reflect how they actually access and view over-the-top video content.

The article, and many commenters, did surface one question. Are analysts, media, and the OTT industry itself asking the right questions when trying to learn how and why consumers cut or shave the cord?

For example, evangelical cord-cutters will argue that it's hardly that expensive to go all-OTT. Well, yes and no.

Yes, it's possible to make a one-time investment of $35 for a Chromecast and run just a broadband connection into your home, and you can start streaming all kinds of content at no additional cost (pay special attention to the word "additional" here, though). No need to even subscribe to Netflix or Hulu. And local broadcast channels can be had for free by hanging an HD antenna in your window (after a one-time outlay of $10-110 for the antenna).

However, the numbers I roughed out were based on the idea that a pay-TV customer wants to have similar content and services that he or she had via the cable company.

So, if you're someone who still wants HBO, AMC and kids' programming for your children -- and, oh, by the way you want to DVR a lot of that while you're at work because on demand programming is still a spotty proposition due to content licensing issues … and you also want Netflix and Hulu and local broadcast channels … and you want to watch that DVR content in your bedroom instead of the living room where the DVR is … the cost is going to go up.

Looking at the difference between just those widely different (and perhaps caricaturized) types of consumers, it begs the question of whether analysts' current survey questions and demographic selections are the right approach to take. Based on demographic information, analysts should be asking widely different questions of different age groups and self-identifying OTT/pay-TV users.

And analysts tend to agree. "In our view, isolating a particular age group (millennials) is a fool's game," said Mike McCormack, equity analyst for Jefferies, in a note to investors. "The reality is many segments of the market don't want set tops and grid guides and it could be a major opportunity for improved profitability."

Simply asking various viewer age groups whether or not they have cut the cord, for example, is not a reliable way to study the issue, analyst Colin Dixon of nScreenMedia told me. "Asking one question to all demographics is always risky because the answer often means something different to each group. Asking this question to under 21 year olds can be very misleading since many/most have never paid for pay-TV but use their parents'. It's more relevant once they reach 24," he said.

Adriana Waterston of Horowitz Research said that the audience issue is complex. "One of the trends we are seeing is that subscription OTT streaming services, like Netflix, Hulu (paid), and Amazon Prime Instant Video are really playing in the same sandbox as traditional multichannel services, because the fact of the matter is, you need to be in the market for a robust offering of great entertainment content to be interested in either," she said.

"There is no denying that traditional multichannel services are experiencing subscriber losses due to streaming and OTT, but in our latest survey of Internet subscribers 18+, (Multiplatform Content and Services 2015) we learned that actually, most people use the two services in a complementary fashion. We found that about four in 10 have multichannel and do not have access to a subscription streaming service, and four in 10 have both -- multichannel AND access to a subscription streaming service. Only one in 10 have access to a streaming service alone, without multichannel service."

What kind of questions should the industry be asking audiences, then? Waterston said the bottom line is that they need to be framed in the right context. "How 'into' TV are they, really?" she said, outlining possible questions that could help better define consumers beyond demographic. "How many individuals in the home have distinct programming needs?"

Further, Waterston said, what value (besides price) do various consumers assign to a multichannel (cable, for example) versus OTT experience? "Putting price back into the equation, what do current cord-cutters miss about multichannel that they are willing to forgo temporarily because of price, but actually wish they had?  What are current multichannel subscribers willing to sacrifice, and how much would the savings need to be?" she said.

Exploring my own experience as a cord-cutter reveals more potential questions for consumers overall. As someone who came of age just as cable reached its zenith, transitioning to an OTT life was not a straight path. It involved a bit more homework, determining what I really wanted in a video experience, and buying the necessary devices and subscriptions that fit what I wanted. (I'm not a big DVR user, for example, so buying a TiVo wasn't a priority -- but for other consumers, it is an important component.) It also involved fielding a few worried phone calls from family members who thought my cutting off cable was a sign of financial problems. (I cut the cord in 2010, shortly before cable executives started to make snide remarks about OTT users being mostly poor people.)

All of which brings up new questions for the industry as it tries to get ahead of the consumer rush to OTT. What are viewers willing to sacrifice in order to go OTT? What can they not do without? And looking in the other direction, what would it take for millennials to sign up for pay TV?

"A better question to the young is 'Do you ever watch linear/broadcast/live TV?'" Dixon said. "Or, what sorts of things do you watch live? That type of question I think has more relevance to all age groups as well."

As more traditional programmers and distributors rush to bring an OTT component of their service to market, asking more detailed, intuitive questions is more important than ever if they want to grab a share of the online audience. --Sam