Public Might Cut Cord on Landlines, Cable TV

As Consumers Take Hard Look at What Subscription Service to Drop, Their Choices Could Reshape Marketing Landscape

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BATAVIA, Ohio (AdAge.com) -- For years, it's been one of those speculative staple questions of consumer-media research: If you could only keep one thing out of a list that included your phone, your TV or your computer and internet connection, what would it be?

But with the recession looming, it's no longer such an academic question. Agencies, media, telecoms and other marketers are pondering the implications of an impending shakeout where, after years of piling on one subscription fee after another, consumers take a harder look at what they really need.
Rishad Tobaccowala, CEO of Denuo and chief innovation officer of Publicis Groupe Media
Rishad Tobaccowala, CEO of Denuo and chief innovation officer of Publicis Groupe Media

Their decisions in what look to be lean years ahead could play a substantial role in reshaping almost every aspect of marketing -- from determining whether DVRs or streaming video win the battle for the eyeballs of time-shifters to making it harder than ever for marketers to survey consumers by snipping the landlines by which much of survey research tenuously dangles.

For years, $200 has been a major resistance point for buying new entertainment or telecommunications hardware, said David Poltrack, exec VP-research and planning for CBS, at the Association of National Advertisers annual conference earlier this month. Now, media, telecommunications and distribution companies are bumping up against a similar threshold in monthly subscription fees, he said.

"Landline, cellphone, television and internet -- it's starting to get around $200," he said. "And the question becomes: What are you going to cut to keep it manageable?"

One for another
"We're seeing a lot of people cut the cord and go to their mobile phone as their primary unit, so we're seeing some decent growth in that side of the business," said John Harrobin, senior VP-marketing and digital media for Verizon, at the ANA. "But 30% of the business we have is traditional landline business, so we're getting offsetting effects."

Meanwhile, he said, Verizon has continued to see increases in broadband penetration as telecommuting has grown in response to rising gas prices.

By most accounts, the ultimate winner could be the computer -- and by extension the broadband connection -- which can provide access to streaming video, paid content, telecommunications services and web versions of print publications alike.

WPP Group's Ogilvy & Mather and Mindshare teamed up with Microsoft recently on an extensive ethnographic and survey research project to profile "digital divas" -- that 16% of women who are most wired, highly viral and increasingly important to package-goods marketers -- and came up with a finding that might seem surprising. The women named laptop computers over TV or even mobile phone as their device of choice.

That might seem relatively middlebrow for the digital elite, but the decision makes perfect sense, said Debbie Solomon, group research director of MindShare, because a laptop with a broadband connection can substitute for almost everything else.

Broadening dependence
Five years ago, when researchers surveyed digitally savvy youth, they were getting the same answer to the "what could you least live without" question, said Rishad Tobaccowala, CEO of Denuo and chief innovation officer of Publicis Groupe Media. "Now, it's moving to the broader population," he said.

"My sense is that you're going to see people paying a lot for one thing," Mr. Tobaccowala said. "The lifeline to the world is a fast internet connection and as much as I can get free from that internet connection."

Losers in the in recession-fueled, technology-paring equation, he said, will be landlines, cable service beyond basic cable and even more-expensive mobile packages.

Other losers, he said, include Blu-ray DVD players and Slingboxes, which become less relevant when consumers rely more on their broadband connections for TV shows or other video. But he said a potential winner will be the first company to develop a seamless way of moving internet content to TV screens.

Mr. Tobaccowala said recession also could slow or halt the erosion of audiences from free, advertiser-supported media to paid entertainment content, which he said is an ultimately untenable trend anyway, as the endgame implies each household ultimately paying at least $1,000 annually for content it once consumed free.
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