for cable tv a bad signal. viewers are fading to black

i Loss of Cable Video Subscribers and Its Implications

CONTENTS

1 Executive Summary

What Is Happening?

The Challenge

2 The Challenge

Cord Cutters - Who Are They? 3 What is Happening

4 Cord Cutters – Who Are They?

5 Allant’s Point Of View: Tradeoffs and Strategies to Overcome Cord Cutting

Allant’s POV: Tradeoffs and Strategies to Overcome Cord Cutting 8 What is Next: Marriage of TV and the Internet

9 Implications for Cable Operators

11 Appendix: Alternatives To Cable

13 Notes & References

Cable video subscribers are the most valuable asset in the entertainment media industry, powering

unprecedented ad revenue growth and programmer fees.

Growing subscriber losses raise alarms – and questions on the long term viability of the business model of

cable distributors and programmers. How real is this risk? Can it be contained…or reversed? This Allant

research study explores video subscriber losses, profiles subscriber segments most at risk, and offers our

point of view on how to overcome today’s challenges and capture new subscriber revenue in a rapidly

evolving environment.

EXECUTIVE SUMMARY

Loss of Cable Video Subscribers and Its Implications 1

EXECUTIVE SUMMARY

Technological progress resulting in rise of devices and opportunities to stream content online coupled with poor

economic recovery have contributed to loss of cable video subscribers. Both cable and satellite providers have seen

deterioration in traditional TV viewership. While most viewers would like less expensive services, only those willing to

put up with the tradeoffs are choosing (thus far) to cancel cable video for free other-the-air services or multiple cheap

over-the-top alternatives. The younger audience is less tied to linear TV and ready to accept the challenges and

experiment with streaming online, while keeping the internet subscriptions.

This issue has potential implications not only for cable providers but also for networks and advertisers which could

miss out on a mass audience and a strong content funding source if nothing is done to stop the trend.

Implications for Cable Providers: customers today demand products and services that fit their needs and budgets,

and cable providers need to find ways to offer right products to right consumers at the right price and the right place

(linear, on-demand, mobile). The first step is to better understand needs of different customer segments and their

behavior, and offer compelling experience.

THE CHALLENGE

2 Loss of Cable Video Subscribers and Its Implications

THE CHALLENGE

It is no secret that cable providers have been losing

video subscribers. The cable industry reported almost

2MM fewer video subscribers in Q1’2011 vs.

Q1’2010 -- about 3% of the subscriber base, and a

record 0.5MM video subscribers lost in Q2’2011.

While subscriber losses have hit cable Multiple

System Operators (MSO) hardest, other pay TV

providers are also challenged. Direct Broadcast

Satellite (DBS) operators with their only video service

offerings that have been poaching customers from

cable have been struggling to add subscribers as

well. Telco companies that traditionally have seen

growth in internet subscriber bases are reporting

modest numbers at this time, with Verizon FiOS and

AT&T’s U-verse together adding under 0.4MM video

subscribers. Meanwhile, in 2011 over the air viewers

grew 14% to 17MM, or 15% of all households.

These loss trends are a major threat to the business

model of cable networks and distributors. Video

subscriptions and their associated ad revenues are

the largest source of funding for network

programmers. A significant shift in viewing behavior

away from linear viewing on pay TV would have a

large (10+%) negative impact on industry revenues,

and on the long term viability of the MSO/cable

programmer business model.

So how real is this risk? The answer depends on how

rapidly consumer behavior is changing, and how the

industry responds to rapidly evolving viewing options

and consumer preferences. Studies show viewers

have not reduced linear and time shifted

consumption of their favorite TV shows to date.

Despite an increase in online consumption of video

content, TV viewership remains the primary platform

for viewing video content among all demographics

(see Figure 1), by an average of 22 minutes per

month per person over last year.

So if viewers value and prefer the traditional TV

experience, why is Cable Subscriber loss happening?

Allant has examined cable video subscription losses

by looking at drivers of cable cancellation and the

state of the marketplace in consumer options to the

cable viewing experience.

Based on our research, we believe two powerful

forces are driving subscriber losses: 1) Appealing

Alternatives to Cable and 2) Negative Macroeconomic

Factors. While these forces are driving losses for very

different reasons, crafting an effective response to

the needs of these audience segments is a critical

need for all MSOs, and a key step in maintaining the

cable business model.

Insight is a vital first step to determining appropriate

actions to reduce subscriber losses, increase

acquisition and retain high value cable video

customers.

By exploring and understanding the key segments of

subscriber loss and their behavior, we will show how

cable leaders can combine compelling experiences

and tailored actions to meet specific segment needs

and overcome business risks.

Figure 1

WHAT IS HAPPENING?


Figure 2

Figure 3

WHAT IS HAPPENING?

A variety of different terms are used to describe

subscriber losses, including cord cutting, cord

dropping and shaving cord or downgrading. Let’s

differentiate between the terms and those customers

who completely disconnected from a cable provider

and left (cord-cutters) and those who downgraded

their services dropping video (cord shavers) but still

have other services with that cable provider.

Polls and surveys suggest differing percentages of

existing subscribers interest in cord cutting, with

estimates ranging from 6% to 48%

A JPMorgan survey found 28% of responders

would consider dropping their cable subscription

and using broadband internet for video content.

(“Nothing But Net” Jan 3’2011)

Experian Simmons New Media Study of cable and

satellite subscribers reported about 16% of the

responders are seriously considering replacing

cable/ satellite service with the internet and

streaming video online.(“National Consumer

Study”, Jun 1’2011)

Advertising Age indicated that 48% of internet

users are comfortable getting rid of cable/satellite

to watch TV via alternative methods including

Netflix, Hulu and other means (Ipsos Observer

Survey Jan 24’2011). It implies that experience

with watching video over the internet or streamed

video are more likely to drop/downgrade cable.

(see Figure 2)

However, Forrester Research reports that just 6%

of US online adults are interested in cutting the

cord to replace pay TV services with online video,

and fewer than 2% are very interested in doing so

(Online Video on TV leads to cord-cutting by 2012,

Forrester, Mar 30’2011) However, the percentage

of users claiming comfort getting rid of

cable/satellite to watch via alternative methods

almost doubles for internet users.

So how do we make sense of the wide range of

responses? Saying one is comfortable getting rid of

cable isn’t the same as doing it. While interest is high,

most subscribers are not (yet) ready to pull the plug

on cable.

Yankee Group found a mere 2% of video subscribers

surveyed have actually canceled their TV subscription

for internet/streaming video (see Figure 3).

Traditional TV still remains the preferred method to

watch video across all generations of US consumers.

Viewers are still very much engaged with linear TV

and prefer to watch their favorite shows in this way.

Figure 3

CORD CUTTERS—WHO ARE THEY?


CORD CUTTERS—WHO ARE THEY?

So if viewers aren’t opting out of watching TV – just

cable - once subscribers decide to leave, where do

they go for services?

We see a growing cadre of cable video subscribers

canceling or downgrading video subscriptions in favor

of content services such as Netflix, Hulu/Hulu Plus,

etc. The popularity of these content services has

increased due to high quality content, the availability

of devices to stream content online, high speed

internet connections, and the growth of social

networks. A particularly noteworthy aspect of this shift

to content services is that it is most often seen with

younger, more tech savvy subscribers.

To better understand the issue, Allant reviewed data

on cord cutters and voluntary attrition of a major cable

provider.

Our analysis confirmed that attrition has behavioral

and demographic segments:

We found that cable video subscriber attrition rates

between 3% – 5%, depending on product mix

(triple play, video & voice, video & high speed

internet, video only) and promotional pricing.

The highest attrition rates are for subscribers with

video-only service and the lowest for triple play

subscribers, since customers value the cost

savings in bundled services.

As might be expected, attrition rates peak in the 6-

12 month period, when promo pricing typically

ends and regular rates apply.

Cord-cutters are typically younger (age range of 18-

34), single, with low household income and more

likely to rent. They are those who enjoy living the

solo life, communicate on a need-to basis and

interact with technology.

An Experian Simmons study of June 2011 (see Figure

4) suggests cord cutters are most likely to be younger

users in the 25-34 age group that stream video online

(50% of cord cutters vs. 30% of households). The

internet is the main entertainment source for these

cord-cutters, who are not interested in costly bundled

services and who only need a fast internet service,

which is a cheaper option for now.

In our view this cord cutter profile explains why cable

and DBS providers experience loss of their subscribers

while companies offering the lowest price for

broadband – AT&T and Verizon – are seeing an

increase.

Younger, technically savvy males who are less

interested in live sports programs are more likely to go

without cable and rely on broadband to watch video.

They are ready to accept the challenges discussed

above associated with “know how to set up,” quality of

content, working devices properly and searching for

content on the web.

To attract this audience cable companies need to

understand this segment, its interests, needs and

wants to identify the best product offerings at the right

price and place.

Although this group has low disposable income now, it

has high earning potential and shouldn’t be

disregarded as advertisers are very much interested in

this hard-to-get audience.

Moreover, there is potential for a generation of “cord

never” viewers – 10-18 year old demographics who

are digitally inclined, Internet-savvy and may never

sign up for cable services once they leave their

parents’ household.

Figure 4

ALLANT’S POINT OF VIEW


ALLANT’S POINT OF VIEW:

VIEWER TRADEOFFS AND STRATEGIES TO

OVERCOME CORD CUTTING

Is there a single source or device that delivers all

types of content? Is it the same experience as

watching video on cable? Would you consider

browsing the internet searching for a favorite program

a hassle or not a big deal? Are viewers ok with

missing their live TV sports or a finale of their favorite

show?

The answer to these questions is - it depends. It

depends on:

The type and quality of content you are looking for

and willing to accept.

Whether you consider yourself technically savvy

and able to execute/follow the “guide”.

Willingness to trade off your time to find content

online versus the price cable companies charge for

immediacy and ease of use of the service (or in

simple terms having more patience than money).

Another continuing trend is that cord cutters and

shavers are looking for ways to reduce their expenses

and explore free content.

The results of the study from Yankee Group on ways

US consumers expect to reduce cost of their paid TV

subscriptions indicate that 36% would cancel

premium channels and 35% switch to a cheaper plan.

A June 2011 Adweek study found 44% of US Internet

users claimed the main driver for dropping cable

would be availability of free content online, followed by

being able to watch that content at the same time as

it is aired.

The proliferation of smartphones and mobile devices

also contributes to the increase the potential demand

for watching TV content on the go. Nearly a third of all

American wireless users are using smartphones, and

almost 10MM Americans own a tablet device. Tablet

ownership rates increased fastest among young

adults ages 18 to 29, with the majority of these tablet

users watch user-generated content like YouTube and

music video.

Despite an increase in ownership of smartphones and

handheld devices, however, high cost is limiting the

growth of mobile video viewing. Consumers generally

are not willing to pay up to $30 a month to watch

linear mobile TV. MSOs with their TV Everywhere

bundles have been slowly moving into that space.

MSOs still face a challenge of offering compelling

mobile service that is appealing to finicky viewers,

however, and some operators (Cablevision) are facing

legal fights with content providers over access to video

on the go.

Countering Alternatives to Cable

While these changes are happening, the feasibility of

dropping cord and migrating online, even if all content

was available, trends in viewing economics make this

choice more challenging than it may appear.

Higher quality on-line content internet-based

programming is likely to become subscription

supported over time, reducing the cost savings appeal

of cord cutting. Hulu is slowly moving away from a

“free content” model and focusing on its fee-based

Hulu Plus, promoting it and making more high quality

content available.

As leading online companies such as Hulu and Netflix

implement pricing changes, they are making the

service more expensive and causing viewers to shy

away. After a recent increase in its subscription fees,

41% of Netflix viewers indicated they would cancel the

service, according to results of a Business Intelligence

poll. Moreover, as of September 2011 Netflix has lost

about 1MM subscribers and is expecting to lose

another 0.6MM in the next quarter.



Also, for the majority, dropping video only and leaving

broadband minimizes the cost savings obtained as a

customer would have to buy high quality content

online anyway and/or pay extra for additional

bandwidth. In response to online users downloading

high quality content (HD and potentially Blue Ray),

cable internet providers created caps on broadband

streaming that increase its cost (examples, Comcast’s

cap is 250GB/month, AT&T—for every additional 50GB

subscribers use above 150 GB per month limit, they

charge $10).

The Key Question:

Will Consumers Actually Switch?

In early 2011 Hill Holliday conducted an experiment,

asking five families to give up cable TV in favor of

connected TV devices for a week. It provided

participants with Roku, Apple TV, Xbox 360, Boxee Box

and Google TV.

At the end of the week, these viewers expressed an

appreciation of cable and showed no desire to switch

to the offered alternatives. The main frustrations

expressed were the lack of availability of live TV, the

required “know how to set up,” onsite programing,

usability issues and working the devices properly.

The verdict for now is that connected devices are not a

replacement for linear cable. Cable marketers should

not be complacent, however. Given the progress in

technology and changes in viewer behavior,

consumers, especially the younger base, are less

interested in linear TV and demand more control of

their lifestyle - what they watch, where and how.

The calculus of cord cutting and shaving is constantly

evolving, and as access to alternatives becomes

easier, cable will need compelling content and viewing

experiences to retain subscribers.

A well designed program of tactics to improve the

cable ‘pluses’ and reduce the cost advantages of

alternatives, based on specific segment needs, is

essential to building and retaining the cable

subscriber base. While this study provides insights

into why losses have happened, marketing and

analysis must work closely to test assumptions and

measure true segment preference and how behavior

is changing as new offers are explored.

Losses due to Negative Macroeconomic

Factors

Video subscribers are exiting pay-TV services not just

because of Netflix or other online video services, but

due to cost-cutting initiatives.

The great recession has hurt many industries, and

cable is not immune to its consequences. A poor

economic recovery, high unemployment rates and a

moribund housing market all have slowed household

formation by about .5MM units per year since 2008 --

reducing the new households for pay TV services to

replace losses. In our estimates, macroeconomic

factors account for 25-50% of 2010-11 subscriber

losses.

Figure 5



Recall earlier the study by Yankee Group that found

2% of video subscribers surveyed have actually

canceled their TV subscription for internet/streaming

video. This is rate of cancellation is consistent with

overall industry subscriber losses in the past year

adjusted for low rates of household formation.

In addition, financial hardship has pushed many

current subscribers to seek lower cost options. With

over 6MM long term unemployed workers seeking

jobs, family finances are strained, and Pay TV is no

longer a ‘must have.’

How Cable Should Respond

Cable providers have few options to address negative

macroeconomic trends in the short term. Over the

longer term, however, as unemployment declines and

household formation recovers with the economy to

more traditional levels, new opportunities will exist to

boost subscriber counts.

As economic conditions improve, former subscribers

lost due to financial hardship represent a prospect

pool with opportunity for targeted win-back. This group

will include subscribers who downgraded service and

former customers. Cable operators must differentiate

between those who are good prospects for offers

when conditions improve, and those who are not likely

to be profitable. By separating (via modeling) former

customers who are good credit risks from non-payers,

operators can structure offers that reward desired

behaviors and build loyalty.

WHAT IS NEXT—MARRIAGE OF TV AND THE INTERNET


WHAT IS NEXT -

MARRIAGE OF TV AND THE INTERNET

Connected TV is eagerly awaited by many in the

industry. With advances in technology, TVs are going

to possess the capability to connect to internet-based

services, thus opening multiple opportunities for the

cable company’s marketers and advertisers to reach

the widest audience possible. On the other hand,

consumers having access to their computers and

mobile devices demand interactivity and are engaged

with social media while watching their favorite shows.

With connected TV, broadcast and social media will

blend, leaving less incentive for cord cutting.

It seems that connected TV is best served by having

dual delivery methods. Content can be delivered via

traditional coaxial connection while interactive

features can stream through an IP connection. As a

result, TV will become yet another connected screen

where consumers’ data can be accessed and used for

various purposes. As a result, the integration of TV and

the internet is likely to have a significant impact on

future product developments and enhancements. One

aspect is the already increasing development of

applications for gamers, music lovers, karaoke

singers, shoppers, etc. with a number of features

including the ability to participate in TV show trivia,

vote for a favorite actor, purchase an item seen on TV,

play along with a favorite game show, or view related

videos and photos.

Consumers love TV shows and enjoy discussing them

with friends. On any given night, at least 2 or 3 of the

trending topics on Twitter are about something that’s

happening on TV shows right at that moment. If a

company wants to help keep a favorite show alive with

product placement among characters, it uses the

brand in exchange for engaging viewers via “t-

commerce” –which is a win-win for everybody.

Connected TV would appear to represent a haven for

advertisers trying to bridge the emotion and

effectiveness of television advertising with the

metrics, interactivity and audience targeting of

internet advertising. For example, rather than

distributing a standard commercial, advertisers could

run the same ad with the option for connected

consumers to pull up additional information, read

consumer reviews and locate a store — all with the

click of the remote control.

Additionally, with connected TV, ad content can be

targeted and relevant, and based on consumers’

interests and behaviors. This means ads will be more

personalized and tailored to an individual viewer,

opening opportunities for addressable or targeted

advertising.

IMPLICATIONS FOR CABLE OPERATORS



Consumers want more control of their life. People

want content at a reasonable price and the ability

watch what they want. That means control over the

pricing of the content (no charge, pay-per-view, small

fee, or downloading), portability of the content (TV

anywhere concept) and availability at their

convenience (time shifting, anytime).

So, is the sky really falling? We believe the noise is

occurring due to experimentation on all ends –

viewers, networks and providers who are trying to

figure out what works and what does not. As of now,

for the majority of viewers, connecting devices and

searching the internet for quality content seem to

require more effort and know how than turning to a

trusted old friend – cable TV.

However, things are changing dynamically and the

implications of these changes are significant. The

existing business’ model upon which most cable

companies have traditionally operated is becoming

less sacrosanct. The “one size fits all” approach,

offering the same services and bundles to everyone, is

being questioned openly by cable operators , and

experimentation with a la carte type pricing is

underway.

In this study, we have identified segments of ‘at risk’

cable video subscribers with different needs and

wants. To slow subscriber losses and reverse recent

trends, it is critical for cable companies to understand

each in depth: (what they watch, where and how),

what product fits to which segment/channel, and each

viewer’s willingness to pay given their alternatives.

Cable companies need to find ways to provide content

at the right price, deal with changes in technology and

create and promote a compelling on demand/online

experience. Creating options that meet each

segment’s needs benefits not only cable providers but

also networks and advertisers.

Jeff Bewkes, CEO of Time Warner, said “The devices

may be cool, but anything that cost money to produce

must be paid for, and any service or channel that

doesn’t carry its weight is destined to die. By letting

customers stream unlimited content for a small fee,

could make the pay channel obsolete. You would

agree that giving away your content almost free is not

a good business model. It is likely that the world would

move to a model where consumers will pay one price

to get a distribution service and another for the

content they actually want. Those who own the

content would reap most of the profits.”

In closing, we offer our summary of observed trends

and what they mean for cable providers and

marketers.

Traditional linear TV commercials still remain the

most effective way to reach customers with ads at

any given time. as Michael Zuna, CMO at Aflac

states, “Video is still an unbelievable medium that

combines sight, sound and motion in a way that

print and other static mediums do not”.

It appears that the majority of cord-cutters today, a

group of 18-34 year old subscribers, are price

sensitive with more time and patience than money,

and ready to accept the challenges of using cable

TV alternatives.

Cable providers are taking proactive steps to give

subscribers more control over the viewing

experience. The supply of content for video on

demand platforms is expanding rapidly, and cable

providers are finding ways to make dynamic ad

insertion work, enabling monetization of Video On

Demand.

TV Everywhere and Smart TV concepts will gain

more popularity. Increased usage of smart phones

and tablets with advances in navigation solutions

will allow US consumers to search and access

video content more easily. Service providers such

as Comcast, Time Warner Cable and Cablevision,

who have the majority of viewers, can leverage

their scale advantages to ‘take the air out of the

room’ from competitors.



Cloud based services are key to cable innovation.

By making the user experience more personal and

valuable, these services increase subscriber loyalty

and create innovaive opportunities for viewer

monetization.

Social media is changing the way audiences

engage with TV, with users are multi-tasking on

digital devices while watching content. We see the

continued growth of new platforms that enable TV

networks to interact with the audience leveraging

insights and quantifying the value of second-screen

advertising dollars.

Broadcasters still have to address challenges they

face in the mobile market to offer a compelling

service that excites an audience accustomed to

time shifting.

Networks could become more aggressive in

negotiating rights for VOD as the viewership grows

and reaches scale, as Brad Adgate, senior vice

president of research for Horizon Media claims.

Even though online video currently offers

marketers more targeting than they get from linear

TV, as digital set-top boxes offer more robust data

TV ad targeting will neutralize online video’s

advantages. Advanced advertising systems will

enable highly targeted advertising that makes use

of the service provider’s knowledge of their

audience to integrate targeted ad campaigns

across linear, online and VOD viewing audiences.

Younger viewers, more than any others, are

changing their viewing behavior and transitioning

online. So it makes sense for marketers interested

in this audience to reach them online with targeted

advertising. Cable providers should explore

opportunities to adjust their product offerings and

create a compelling online experience to win them

back.

Will the cable and media industry be able to maintain

control over the content and audiences while taking

advantage of technology innovation? Answering this

question defines whether we will see significant shift

in viewership from traditional TV which entails cutting

and shaving cable to migrate online.

APPENDIX: ALTERNATIVES TO CABLE



Pay TV Operators

DBS operators DirectTV and Dish Networks have been

adding features and services comparable to those of

cable providers in video products, and offer a lower

price to their new customers enticing cable

subscribers to switch given that there are almost no

switching costs for video viewers. However, both

operators have experienced very high churn rate

attributing it to intense competition and a poor

economic recovery.

Phone companies AT&T/U-verse and Verizon/FiOS

have built and continue building wireline fiber-optic-

based networks, in some cases using Internet protocol

technology that provide high speed internet in areas

generally served by cable companies. Given advances

and facing less technological challenges, these

companies can offer lower prices for similar types or

better services (see table below). Not surprisingly they

have seen growth of their subscriber bases.

Product/

Provider

Video

Only

Video & HS

Internet

Internet

Only

Triple

Play

Comcast $29.99/

12 mo.

$69.99/

6 mo.

$19.99/

6 mo.

$99.00/

12 mo.

Charter $49.99/

6 mo.

$54.99/

mo.

$19.99/

mo.

$69.97/

12 mo.

CVC * * $29.95/

12 mo.

$99.80/

12 mo.

DirecTV $29.99/

12 mo. n/a n/a n/a

ATT/

Uverse

$29.00/

12 mo.

$49.00/

6 mo.

$19.95/

12 mo.

$89.00/

12 mo.

Verizon/

FiOS

$64.49/

mo.

$79.99/

12 mo.

$14.99/

6 mo.

$99.99/

24 mo.

Source: websites of the above companies as of Aug 2011

Online Streaming and Over The Air (OTA)

Providers

Disconnecting cable in favor of broadband and over-

the-air is more challenging than it seems on the

surface, but certainly acceptable to some viewers.

While most viewers would like less expensive services,

only those willing to put up with the tradeoffs are

choosing (thus far) to cancel cable video for free over-

the-air services or multiple cheap over-the-top

alternatives.

10% of US adults are watching online video via

different internet-connected devices. Adding to its

appeal, much content is available free of charge.

Technology offers new

ways to watch video

content, with a

growing amount of

content on services

such as Netflix,

Hulu/Hulu Plus,

AppleTV, YouTube,

Amazon, Google TV,

network websites, etc.

According to a study by Frank N. Magid Associates

(July 2011), the most popular devices used by internet

users to stream video are AppleTV followed by Roku,

while Slingbox and Boxee Box are not gaining as much

popularity as anticipated. Slingbox was not embraced

by cable companies because of its ownership and

affiliation with a competitor - Dish Network. However,

to retain its profitable customers, Time Warner Cable

recently announced plans to subsidize Slingbox for its

top-tier Internet service subscribers, indicating that

the Internet service is becoming its core offering.

Boxee on the other hand seems to have some issues

with programming and its usage which have not

helped the adoption percentage.

Google TV with its Android-based operating system is

lagging behind other streaming providers due limited

content. In addition, given competing advertising

models, cable programmers and operators are not

likely to back the Google initiative anytime soon,

potentially cutting the Google service out of the bulk of

its market.

As for over the air (OTA) service, reception quality can

be a problem in urban areas, and live sports programs

featuring local teams are often on cable networks. It



is interesting to note that OTA service has been

growing rapidly among the increasing Hispanic

population which, in general, is less interested in local

sports programming.

Video On Demand

While traditional TV still remains the most preferred

way to watch video, comfort with new viewing

alternatives is growing. Video on demand is gaining

popularity - 45% of the Consumer Electronics

Association study responders indicated that they use it

as a source of video content, 72% indicated that they

watch movies and TV shows on DVD, VHS or Blue-ray

disc, 27% cited a paid subscription service such as

Netflix or Hulu Plus used to access movies or TV

shows, while only 4% of responders have used

streaming video from a mobile phone (see Figure 6).

Using online sources for video content is most

prominent for a group of 18-34 years old, per the

Morpace Omnibus report. “On Demanders,” on the

other hand, are somewhat older viewers, an average

of 38 years old (23% are 18-24 years old), have

college degrees and a median income of $65K (SAY

Media, Oct 2010).

According to a PwC survey (February 2011), 42.6% of

the responders indicated they use Netflix’s

subscription service, 31.7% stream TV content from a

small-fee subscription service, while 30.7% obtain TV

content for free. A Diffusion Group study indicated

37% of cord-cutters watch half or more of their TV on

Netflix and Sandvine Research reports that Netflix

accounts for nearly 30% of downstream internet traffic

during peak viewing times.

Virtual MSOs such as Netflix and Hulu/Hulu Plus are

leading sources for video content online, with Netflix

representing over 20 MM users and Hulu, gaining

share from 4.2% to 4.6% (March’10 vs. March’11).

One Touch Intelligence has found that 4%, or almost

1MM viewers, of all Hulu subscribers are Hulu Plus or

its fee subscription users. According to Nielsen,

Netflix and Hulu are complimentary to each other with

Netflix used mainly to watch movies (53%) while Hulu

to watch TV shows (73%).

Figure 6

NOTES AND REFERENCES




© 2011 Allant Group, Inc. All Rights Reserved Confidential & Proprietary

ENDNOTES

Figure 1: Nielson, “State of the Media: The Cross-Platform Report,” June 15, 2011

Figure 2: J.P. Morgan, “Nothing But Net 2011,” provided to eMarketer, Jan 3, 2011

Figure 2: Advertising Age survey conducted by Ipsos Observer, Jan 24, 2011

Figure 3: Yankee Group, “Pay Tv’s Uncertain Future,” Aug 31, 2010

Figure 4: Experian Simmons, “National Consumer Study,” June 1, 2011

Figure 5: Special Study for Housing Economics, “Pent-up Housing Demand: The Household Formations That Didn’t

Happen—Yet,” Robert Denk, Robert Dietz, PhD and David Crowe, PhD, February 2011

Figure 6: Consumer Electronics Association, “Cord Cutting and TV Service: What’s Really Going On?” conducted by

Opinion Research Corporation, May 31, 2011

Appendix and Notes Section:

Nielsen: Based on total users of each media

Experian Simmons, “New Media Study,” June 1, 2011

Frank N. Magid Associates, “Magid Media Futures: Online Video Reaches New Heights in Digital Nation

2011” sponsored by Metacafe, July 22, 2011

PricewaterhouseCoopers, “The speed of life: How consumers are changing the way they watch, rent and buy

movies,” Feb 1, 2011

Yankee Group, “Pay TV’s Uncertain Future,” Aug 31, 2010

Nielsen survey data: March 2011

Elastic Path Software, “Monetizing Online Video 2011” conducted by Vision Critical, Jan 31, 2011

for cable tv a bad signal. viewers are fading to black

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