Whitney Houston sang about how children are our future. But what’s the future of cable TV if the next generation cuts the cord, or forgoes the service altogether?
With broadband connections and cheaper entertainment options available, twenty-somethings have cut the cord in record numbers. 8.5 percent of households with people 25 and younger have said goodbye to cable bills—almost twice the national average, according to Nielsen. The question many networks and cable operators have been asking themselves is: How big of a problem is this?
In this piece, we take a peek at this group’s viewing and spending habits. In a subsequent post, we'll explore the impact this group has on advertisers and the TV industry.
Income and spending habits
Disrupting the stereotype that only low-income households are abandoning their monthly subscriptions, analyst Strategy Analytics found the typical cord cutter is young, educated and employed. Of those likely to give up their cable subscription, 54 percent are younger than 40 years old. That under 40 crowd is an important group to keep an eye on: it’s a big demographic composed of many individuals with rising incomes.
Compared to their future selves—who will be further along in their jobs and careers—twenty-somethings make less money. They currently have an annual income of roughly $16,000 to $40,000, according to the Bureau of Labor Statistics. For those in their mid- to late-20s, the range is closer to $30,000 to $40,000. Their average entertainment spend ranges from $1,000 and $1,700 per year, and their discretionary spending tops $16 million in 2008, Deloitte found.
Even as TV audiences grew 1.5 percent to 51.3 million people watching at any given time of day—whether live, recorded, broadcast or cable—those ages 18 to 49 are spending less time in front of a conventional television, the Wall Street Journal reported earlier this year. About 25 million people between ages 18 and 49 were watching TV at any given time, a 1.4 percent decrease from the year-earlier period, and a 2.7 percent decrease from two years ago.
For cable and satellite operators, there is good news. First, there are still some 100 million subscribers in the U.S.—not exactly an insignificant sum. Second, it’s not that younger generations aren’t watching—they’re consuming more video and digital content than ever before. It’s that they are watching in new ways and on new devices. This represents a huge opportunity for forward-thinking operators and other players.
For instance, numbers suggest that young adults are more engaged and have a bigger appetite for digital entertainment than babyboomers, who in contrast spend a bigger portion of their free time in front of the tube. Those ages 18 to 32 make up a third of total viewers for online videos, according to a report by a TDG analyst.
The generation that grew up with high-speed Internet is cutting TV from its routine, instead choosing cheaper and more-varied entertainment options on the Web. If the trend is lasting, it will mean a fundamental shift in how content is distributed and consumed. As older generations fade, millennials will graduate to make up TV’s core audience. But if they don’t return to TV, how will advertisers reach them? We’ll tackle that question in part two.