Last week, The Convergence Consulting Group’s latest research report, "The Battle for the American Couch Potato," received a lot of press. The title of the report is a separate blog topic"”what I’m here to discuss is the company’s "major finding" that by the end of 2009, nearly 800,000 households in the US had "cut the cord""”dumping their cable, satellite, or telco TV providers for Web-based videos and downloadable shows.
Articles featuring this finding popped up everywhere on the web with titles like "Can TV Everywhere stop the cord-cutting trend?", "Telcos navigate couch potatoes and cord-cutters", "Is it worth it to dump your TV for online streaming", and "Cord cutting numbers up and accelerating as more turn to web."
The hype died down quickly. After all, 800,000 households cutting the pay TV cord is less than 1% of the approximate 100M US households who subscribe to TV.Â As substitutes such as Hulu, Boxee, Netflix and the likes of Google, Microsoft, Amazon and Apple continue to gain momentum in the space and as TV audiences watch more and more shows online, it’s certainly a trend worth monitoring. But, for now, most of us good ol’ couch potatoes continue to research and shop online for pay TV services, among other telecommunications services.
As shown in the chart below, visitors to the MSO and Telco websites are increasingly researching and shopping for Video or Pay TV services.
* Companies included in analysis: AT&T, Cablevision, Comcast, Cox, Time Warner, and Verizon
** Product visitors is defined as traffic to any Learn or Shopping pages and includes Ad Landing Pages
- In Q1 2010, 36% of online Product visitors viewed Video/Pay TV Product pages, a 9 point increase over Q1 2009
- On a volume basis, Video/Pay TV Product pages saw an additional 1 Million online visitors in Q1 2010 over Q1 2009
- This chart also shows that while Broadband was the most visited product in Q1 2009, Bundles became the most visited product in Q1 2010,Â further suggesting that people are not ready to pull the Pay TV cord
So, now that we know the death of Pay TV is not around the corner, how are the Multiple System Operators (MSOs) performing against the Telcos in terms of share of total online product shoppers?
As evidenced in the chart below, the Telcos are holding on to their market share leads across Bundles, Video and Broadband. Verizon and AT&T’s large online and offline advertising budgets and marketing strategies seem to be driving consumers online to research and shop for their services. The MSOs, as a whole, have not been able to chip away at share despite anti-DSL marketing campaigns, heavily discounted promotions and other tactics.
Getting consumers to the site and to the product pages is certainly just one piece of the pie. At Compete, we also look at the competitors’ effectiveness at getting shoppers through the funnel"”to the online shopping cart and to online order completion.
Here we’ll look at online orders. Â Between Q1 2009 and Q1 2010, the MSOs, as a whole, lost market share to the Telcos in online orders among Broadband, Video and Bundle shoppers.
- Most notably, the MSOs lost more than half of their market share to the Telcos in terms of online orders among Bundle shoppers between Q1 2009 and Q1 2010
- Further, the MSOs gave up 9 percentage points to the Telcos when looking at online orders among Video shoppers
- While not shown in the chart, overall online orders among Video and Bundles increased in the same time period. Orders among Broadband shoppers were flat and those among Voice shoppers declined
The Telcos have raised the playing field realizing that the online channel should not be treated as a passive channel, but rather an active channel to help convert shoppers into buyers and to reduce acquisition costs. Not only are they offering very competitive online only offers, but they are enhancing the experience, making it easier to research and buy telecommunications services online.
Surely, this is looking at Telcos v. MSOs as a whole so there are certainly more insights to glean on a competitor by competitor basis. But one thing is certain: the Telcos do seem to be navigating couch potatoes and cord cutters better than the MSOs online.