Consumers Aren't so Keen on Cutting the Cord After All, Survey Finds

After Slight Dip, Number of TVs per Household Slowly Increases, Along With Pay-TV Subscribers

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It might just be time to cut out the "cutting the cord" debate.

The percentage of American households that owns a TV continues to inch up, as does the number of pay-TV subscribers. After the brief decline, pay TV saw an increase in subscribers in 2010, according to SNL Kagan. It's much slower growth than in previous years, but it is still growth.

Last quarter Ad Age and its survey partner, Ipsos Observer, found that people were evenly split on whether they would be comfortable giving up pay TV for another premium option, such as Netflix streaming, Hulu or free streaming options on the web. This quarter's survey of traditional media habits found that figure essentially unchanged. (Interestingly, there is also no meaningful difference between the 18-to-34 age range and 35- to 64-year-olds. However, the over-65 demographic was much less comfortable dropping pay-TV services, despite data showing growing comfort with digital platforms.)

But the survey also showed an important countertrend: While a small percentage of respondents are cutting the cord, it seems even greater numbers of them are adding more and different options. It's not an either/or situation with pay TV and the internet. "People want to control how they are entertained and where they are entertained," said Kevin Hartman, senior VP-director of customer intelligence at DraftFCB.

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Source: Ad Age/Ipsos Observer survey

By wide margins, people are adding to their cable service rather than cutting back. One quarter, or 25%, said that in the past 12 months they have subscribed to a new cable or satellite service. Some 15% upgraded to a higher-tier service, 16% added a premium channel, 18% added HD service and 14% added a DVR or an additional receiver. On the flip side, just 7% said they downgraded their service to a lower tier, 7% dropped premium channels, and only 6% dropped service outright. The online survey polled 1,000 representative respondents in early April.

The survey data tracks with figures released by the major carriers. DirecTV reported 663,000 net new subscribers in the U.S. last year. In its fourth-quarter earnings statement, it also noted an increase in demand for advanced services such as HD and DVRs. Likewise, Comcast reported a slight decrease in video-only subscribers but an increase in digital video subscribers and bundled services such as combined cable, internet and phone. The company noted that 1 million existing video customers upgraded to HD or DVR services.

The proliferation of platforms, coupled with the economic upheaval, makes it difficult to reach firm conclusions at this point. "I think the data is very muddy right now," said Craig Moffett, an analyst at Sanford C. Bernstein & Co. "It's hard to pretend that cord cutting simply isn't happening." He proposed that might be due to economic stresses rather than technological advances.

Our survey agreed. For those who did cut the cord, a slight majority said it was for budgetary reasons. Other reasons included using the service less than they did previously, moving to a different location and bad customer service.

About half of respondents said they watch free TV programs on a device other than their TV, such as a computer, iPad or mobile device. Some 43% said they watch TV shows via a premium service such as Netflix streaming, Hulu Plus, or paid iTunes downloads.

They are receptive to advertising on these platforms, but more so if the content is free. Only one in six said they were unwilling to watch any ads on a free service. Nearly 60% said they would watch more than one. One in five said they would watch as many as would normally appear if the show were on broadcast or cable TV.

The picture is a little less rosy for advertising on the premium services. Subscribers clearly expect some trade-off for their fees. Forty percent said they would be unwilling to watch any commercials on these platforms. Only 12% watch as many spots as normal.

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