New Body Blow for Pay-TV

The day before AT&T disclosed it lost nearly 900,000 pay-TV subscribers in 90 days, which included online TV, new data from The Trade Desk finds 64% of U.S. households with at least one screen have cut the cord with cable TV, are planning to cut the cord, or never subscribed.

Results are based on an online survey of 2,681 respondents from April 1-3. The survey also highlighted major differences in cord-cutting behavior by age group, including the fact nearly 75% of respondents 18-34 have little interest in pay-TV. That percentage declines among older respondents: 35-54 age group (64%) and 55+ (56%).

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The data is significant considering the 18-34 age group has long been coveted by advertisers because of its disproportionally high disposable income, because they are at a stage in life where they are starting to build long-term brand loyalties, and because they are trendsetters for all age groups.

While the majority of American households currently subscribe to cable, the research indicates that cord-cutting will accelerate in the future. The urgency of these shifts is only becoming more apparent as almost all U.S. consumers stay at home during the ongoing coronavirus pandemic.

Of those households that do still have cable TV subscriptions, 11% plan to cut the cord by the end of the year. That figure jumps to 18% within the 18-34 age group.

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These trends are expected to accelerate the longer that live sports programming remains suspended in the U.S. According to the survey, the majority of Americans, 60%, say watching live sports is the primary reason they have kept their cable TV subscriptions.

“With only a quarter of young adults having any long-term interest in traditional cable TV, in a few years we won’t be talking about linear or cable TV at all. It will all be online and streaming,” Brian Stempeck, chief strategy officer, The Trade Desk, said in a statement. “For broadcasters and advertisers, it’s now all about how quickly they can pivot to where the eyeballs are moving and many of them are already investing heavily in order to succeed in a world of connected TV.”

The survey suggests TV consumers favor ad-supported streaming over subscription-based streaming as more and more Americans watch TV content via connected devices such as smart TVs. Overall, 35% of the younger demo (18-34) would rather watch a free streaming service with advertising or some ads for a cheaper subscription, versus 31% who would prefer to pay for a subscription with no ads.

The preference for ad-supported services increases when the viewer receives value in return. For example, 66% of 18-to-34-year-olds would prefer to watch a streaming service with ads every other episode in order to lower their monthly streaming costs. That number drops to 55% for the 35-54 age group and 47% for the 55+ age group.

Younger age groups also have a larger appetite for ads that are relevant to their interests. By a ratio of 3-2, the 18-34 age group prefers tailored ads, the highest ratio of any age group.

The research also shows that the leading cause of frustration with streaming advertising among American subscribers is having to watch the same ad repeated multiple times (cited by 48% of subscribers). The second leading cause of frustration is having to watch too many ads overall (cited by 45%), followed by the number of ad breaks (cited by 37%).

“As more consumers shift to connected TV (CTV), broadcasters and advertisers can more easily address issues of ad frequency and ad volume, in ways that are not possible in a traditional TV environment,” Stempeck said.

The analyst said connected TV viewing affords advertisers the ability to work with an ad tech partner to understand who was exposed to an ad, even across devices, and can reduce ad frequency as a result. In addition, with CTV, advertisers can apply more data science to their advertising, making it more relevant to the consumer without compromising their privacy.

“This increases the value of the ads, which means lower ad volume, over time,” Stempeck said.

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