• Warning: Not All Cord-Cutting Research is Created Equal

    When it comes to understanding cord-cutting trends, not all consumer market research is created equal. In my view there are two basic types. The first is speculative research that focuses on "potential" cord-cutters. The second is research that focuses on actual cord-cutters. For industry participants trying to get an accurate handle on this complicated topic, the second type is much more valuable.

    The big problem with speculative research is that there's a massive difference between what people say they're considering doing (or even say they're planning to do) vs. what they will actually end up doing. In fact, it's a cliche this time of year to resolve to do certain things, though in reality we never will. How many of us said we'll get more exercise in 2011? Lose weight? Stop smoking? Save more money? And how many of us actually will? You get the idea.

    Yet, as obviously flawed as speculative market research is, when it comes to the sexy topic of cord-cutting, it seems to continue meriting special credibility and media coverage. The latest example came just yesterday. As reported by AllThingsD (and others), new research from J.P. Morgan analyst Imran Khan says that an eye-popping 28% of cable/satellite TV subscribers would consider switching from cable to broadband video.

    Though I haven't seen the actual research, its value is dubious based on the survey question that yields the 28% conclusion. The question abstractly asks "Would you consider switching from Cable to Broadband Video?" naturally driving up those answering "yes." Even a more definitive question that starts with "Are you considering" would no doubt result in a lower number answering "yes." Then, if the question enumerated the downsides of doing so (e.g. losing live sports and HD, buying and setting up new equipment, etc.), the number of "yes" answers would further plummet.

    Importantly, as with New Year's resolutions, those who answered "yes" who will actually follow through and switch is likely to be miniscule. Nonetheless, Khan's conclusion is that cord-cutting and over-the-top delivered video is "A consumer-driven Tsunami."

    However, historical and current research on actual people who have dropped their pay-TV service suggests that rather than a "Tsunami," cord-cutting is barely yet a ripple. For instance, last week Leichtman Research published results of a survey of actual pay-TV subscribers which showed the percentages of people who dropped their service in the past year, and those who plan to subscribe to a pay-TV service in the next 6 months are similar to percentages found in its 2002 survey. Further, in the survey sample of 1,308, just one person who dropped service in the past year and doesn't intend to subscribe again did so because she can watch all she wants online or in other ways - and she would have dropped anyway to save money.

    Does this mean pay-TV providers shouldn't be doing all they can to expand their value propositions to incorporate online and mobile video options? Of course not. The recent explosion of over-the-top alternatives coupled with the soft economy has already led some people to reduce or drop their pay-TV service. Over time this is likely to increase, simply because choice always leads to fragmentation. But the onslaught of speculative cord-cutting research and the media attention it gains is creating a skewed impression of what's actually happening in the market today. More than ever, that means industry participants must read beyond the headlines and critically evaluate the data being offered up.

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