Michael Grotticelli /
06.23.2011
Originally featured on BroadcastEngineering.com
Netflix users more likely to cut the pay-TV cord

A survey of 2,00 adult broadband users in the United States has found that people who use Netflix to stream Internet video to their TV are twice as likely to cancel or cut back their cable television payment options as they were a year ago.

The findings are from the Diffusion Group (TDG), a Dallas-based media research firm. When the organization surveyed Netflix members in 2010, it found that 16 percent of customers were planning to downgrade or cancel their cable television service. During the same survey this year, the number of customers planning to make that change had doubled to 32 percent.

The report appears to contradict many cable executives, who have long argued that any cord cutting is strictly the result of a poor economy. The report found that although the majority of those surveyed cited economic reasons and “the need to save money” as a rationale for canceling cable, 34 percent said a growing use of online video is the reason. Two-thirds of the respondents cited Netflix in particular as the primary reason for the change, the report said.

Although Netflix has gone to great lengths to reassure pay-TV operators that its offerings are additive to regular TV viewing and thus not a competitive threat, research now suggests that the “Netflix effect”— that is, the growing use of Netflix leading to pay-TV service downgrades and even cancellation — is gaining momentum.

“Despite its rhetorical positioning, both Netflix and pay-TV operators have long been aware that there will come a point at which its services are not only detrimental to regular TV viewing, but antithetical to pay-TV subscription levels,” said Michael Greeson, TDG founding partner and director of research. “The question for realistic observers has been not if this will occur but when. According to our latest research, that time is upon us.”

Among moderate and heavy Netflix streamers, 61 percent cited the growing use of online video as the primary reason for canceling their cable subscriptions. Only 24 percent of moderate and heavy Netflix streamers said economic concerns were their primary motivation for downgrading.



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