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On the heels of the Consumer Electronics Association’s recent study of cord-cutters comes yet more research on the phenomenon. But this one should be taken more seriously than the CEA’s efforts because it focuses on a specific demographic – Generation Y, or those born in or after 1979.

 

‘Gen Ys’ are a critical group to watch. Their viewing habits and decisions are of tremendous interest to advertisers and marketers, as they currently occupy the lion’s share of the coveted 18-35 demographic.

 

Gen Ys literally grew up with computers and embrace new electronic gadgets more quickly than Gen Xers and us ‘old fogies’ in the Baby Boomer group. They are ‘connected’ with smart phones, laptops, and tablets, and are just as likely to search out video content on the Internet as watch it through cable or satellite TV services.

 

The study, conducted by research firm Ideas and Solutions! of Los Angeles, states that pay TV service providers are at risk of losing this group due to increasing price sensitivity to subscription television. According to a story in MediaPost, 69% of so-called ‘on the fence’ Gen Y cable customers are classified as ‘at risk’ for dropping service because it’s just too expensive.

 

This group spends nearly half of their TV viewing time watching Netflix and Hulu. Of the survey group that still favors pay TV, Netflix and Hulu viewing dropped to about 25%.

 

The survey results should surprise no one who knows Gen Y well. I have two ‘connected’ Gen Ys in my family (ages 25 and 20), and they’re always looking for ways to cut down on expenses. Some Gen Ys have enormous college loans and low-paying jobs (or are unemployed, or temping), so pay TV is an expensive luxury when compared to rent, groceries, and gas for the car (if they own one!).

 

This group is also more interested in broadband access than pay TV channel packages, and that’s already having an impact on the established subscription TV business.  A story in today’s Wall Street Journal quotes Time Warner CEO Glenn Britt as saying that broadband is rapidly becoming the company’s ‘anchor product,’ and that “…people are telling us that if they were down to their last dollar, they’d drop broadband last.”

 

Britt went on to point out that TW’s broadband customer count is closing in on its residential video customer count (9.5M vs. 12.3M in Q1 ’11). Also, TW has another 2M broadband-only customers, many of which have dropped cable for satellite services. You can be sure Gen Ys are well represented in the totals for broadband service.

 

The result is that TW may shift to more of a ‘single play’ marketing effort, pushing broadband at the expense of subscription TV and voice over IP (VoIP). The latter service is a harder sell to Gen Ys, as they rely on their mobile phones and often have no wireline telephones in their apartments and homes.

 

In my experience, Gen Ys who are informed about or become aware of free, over-the-air digital TV are quite happy to watch it as a substitute for pay TV, mixing it with YouTube, Netflix, and Hulu. The question is; how many Gen Ys even know they can get free digital TV?

 

Maybe it’s time for a new outreach campaign by NAB, broadcast networks, and TV station ownership groups!

Posted by Pete Putman, June 2, 2011 9:47 AM

About Pete Putman

Peter Putman is the president of ROAM Consulting L.L.C. His company provides training, marketing communications, and product testing/development services to manufacturers, dealers, and end-users of displays, display interfaces, and related products.

Pete edits and publishes HDTVexpert.com, a Web blog focused on digital TV, HDTV, and display technologies. He is also a columnist for Pro AV magazine, the leading trade publication for commercial AV systems integrators.