“Cord cutting” has become a front-and-center concern for cable operators in recent years, as many of their subscribers have ditched traditional TV packages for other options such as over-the-top (OTT) services, including Netflix, Amazon and HBO Now. At the same time, younger viewers in particular have increasingly opted to forego cable subscriptions altogether, earning the label “cord nevers.”

The current state of cord cutting and the cord nevers

Recent studies of these two major trends lay out a challenging road ahead for cable and satellite providers:

  • Convergence Consulting, in the 2016 edition of its annual Couch Potato report, estimated that 1.1 million American households cut the cord in 2015.
  • When combined with others that have never even had pay-TV service, these households represented more than one-fifth (20.4 percent) of all U.S. households; that figure was expected to climb to 21.9 percent by the end of 2016, according to Convergence.
  • A Nielsen study released in March 2016 revealed a strong correlation between age and likelihood of canceling cable/satellite service. Nearly 40 percent of millennials planned to cancel in favor of internet-only options, compared with only 9 percent of those 65 and older.
  • Forrester Research projected in 2015 that the total number of cord-nevers is actually larger than the number of cord-cutters, at 7 percent and 6 percent of the U.S. population, respectively. The firm also predicted that by 2025, half of viewers under the age of 32 would not pay for TV under the traditional model.
  • According to eMarketer, cable and satellite providers will likely shed TV subscribers through 2019. It expected the number of cord-cutters to jump more than 12 percent in 2016 from the year before.

What should cable operators do in response to these changes to best recapture and retain subscribers for long-term sustainability? For starters, their efforts should be focused on improving the full user experience, from how shows are organized in software menus to how TV remotes are designed as hardware. These actions help address the significant and varied pain points of the typical pay-TV experience. Let’s explore some of the most common of these challenges.

1) Finding the show you want to watch

“Channel surfing” has been a staple of TV watching for decades, but it’s hardly enjoyable and has in fact been skewered in media such as the Bruce Springsteen song “57 Channels and Nothin’ On.” Research from Evolution Digital has found that cable subscribers as well as cord-cutters routinely become frustrated searching for content on legacy set-top boxes. A subpar search experience, vis-a-vis OTT offering in particular, may contribute to higher rates of cord-cutting.

Finding a show to watch can be difficult.Navigating and searching TV shows and movies can be cumbersome.

Indeed, navigating a traditional cable channel grid can be a jarring experience for anyone who is accustomed to universal search functionality embedded in most OTT and Video on Demand platforms. However, the interface of a streaming service, such as Hulu Plus, can present its own drawbacks, particularly in how the search features can make the amount of content seem overwhelming and send viewers back to the relative simplicity of the channel grid. Consumers who have both cable and OTT options may find something unique to dislike in each of them.

Overall, consumers spent 115 hours, or more than 4 days, each year trying to find something to watch, according to Exstreamist. One solution to this problem of wasted time and search anxiety is an “all-in-one” STB like the Evolution Digital eBOX™ IP Hybrid Set-Top Box, which can search content across both cable and streaming options. This device has the advantage of integrating two popular forms of programming, or just one if the viewer prefers, and providing generally simplified remote and connection setup.

2) Accessing OTT apps

Accessing cable and internet-based streaming can be complex due to the different hardware (e.g., STBs, streaming boxes, proprietary chargers and connectors, etc.) that has to be used side-by-side. Your TV may need multiple inputs and require a specific remote for each service.This setup can be especially discouraging for viewers 40 and older, who in the Evolution Digital study expressed particular frustration in switching between sources.

Consumers seem to be looking for simplicity in terms of how video content is accessed, managed and organized. The key is having one device connected to the TV, controlled by one remote control that delivers cable, broadcast and OTT services with a universal search function across all content. Importantly, keeping viewers inside the “walled garden” of a cable set-top box allows cable operators to offer their own transactional Video on Demand service which can further enhance revenue opportunities.

3) Obtaining skinny Bundles

Another compelling finding from the Evolution Digital study was the interest in “skinny bundles” among cord cutters. When paired with Evolution Digital’s eBOX, a lower cost package of programming, plus access to OTT services, provided a reason for cord cutters to consider returning to cable. Skinny bundles have the advantage of being cheaper since they usually leave out expensive channels such as ESPN and Fox Sports 1. Plus, they drop many obscure channels that most viewers may not be interested in. In 2015, Comcast rolled out a $15 monthly web TV service that included HBO and the standard live broadcast channels.

“The eBOX allows everything to be supported with a single connection to the TV.”

eBOX can be used with a skinny bundle or a regular cable subscription (in addition to OTT apps), providing flexibility for cord cutters/cord nevers who want to consolidate their streaming services while maintaining a subscription to channels that one cannot get online (i.e. broadcast channels) at a price point that is accessible.

4) Affording the STB

The single biggest complaint from cable subscribers and former cable subscribers is the monthly rental fee for the set-top box.  Removing that obstacle and offering another way for customers to acquire the in-home equipment would go a long way toward retaining current customers and re-acquiring former subscribers. In fact, nearly 80 percent of the cord-cutters from our study stated that they would consider returning to cable if they could simply buy the box instead of paying a monthly rental fee, the latter being a standard feature of many cable packages.

Purchasing the box would also help simplify the cost structures of having both cable and OTT viewing options: There would be one less fee to pay each month. A one-time fee for a box consolidating both cable and streaming options, with no data caps, was in fact the most appealing solution to cord-cutters in the Evolution Digital study.

Indeed, upfront payments have become increasingly appealing options for consumers across the board, even making their way into mortgage insurance, as The New York Times noted. They help assuage concerns over monthly costs as well as anxieties about gradual increases in subscription pricing.

Improving subscriber retention and growth

Controlling subscriber churn, regaining cord cutters and courting cord nevers are still significant challenges, but cable operators have viable options in front of them. They can capitalize on the popularity of OTT services and the general satisfaction with cable service by integrating them into a single device such as Evolution Digital’s eBOX®, which provides easy setup and management.

It is also important for the cable industry to acknowledge that, by offering customers a cost-effective solution that aggregates their favorite TV shows and movies into one place, it will stem the loss of viewers. Skinny bundles may be a solution to further bandage that wound, as consumers are increasingly seeking out ways to access their favorite content. Evolution Digital’s eBOX does that job for them by making search and navigation easier than ever, while keeping the cable operators that source of content and, therefore, revenue.

Other News
FierceCable | August 4, 2016 … with Torryon Coleman, VP…