How Can Cable and Satellite Providers Survive the 'Cord Cutting' Trend?

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Have You ‘Cut the Cord’ Yet?How Can Cable and Satellite Providers Survive the ‘Cord Cutting’ Trend?

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Definition: The process of cutting expensive cable TV or satellite TV connections in order to change to a free or low cost entertainment option

What is cord cutting?

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Why analyze cord cutters?

Increasing commitment (subscribers) to traditional content providers as CHOICE increases

1928 TV introduced in the US

1948 Cable introduced in the US

1962 Satellite introduced in the US

1972 HBO (premium content)

2007For the first time in almost 80 years,

someone challenged the traditional content model and a decrease in commitment to

traditional providers began

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Increase in canceled subscriptions:• 161,000 customers lost in Q2 2012• 196,000 customers lost in Q2 2013

Declining new subscriptions: • New subscriptions in Q2 2012: 59,000• New subscriptions in Q2 2013: 8,000

18% increase in churn in 1 year

86% decrease in new contracts in 1 year

“Any investor paying attention knows that cable TV is dying a slow death.”-Jeff Reeves, Slant Magazine

Are cord cutters really a threat to cable and satellite companies?

Data pulled from Time Warner Cable’s financial reporting press releases

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Maybe it’s just Time Warner that is losing market share?

No, all four of the providers analyzed are seeing market share loss

• 400,000+ net subscribers lost in Q2 2011 – Q2 2012

• 159,000+ lost in Q2 2013Kristina Acuna, Business Insider

• 84,000 net subscribers lost in Q2 2013

DirectTV Q2 financial results

• 78,000 net subscribers lost in Q2 2013

Dish Network Q2 Financial results

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Consumers are fed-up and complain that cable/satellite companies will not (or cannot) change

“Cable is an obsolete grotesque monster that has learned to gobble up

far more money than it is worth.”- Edward, a Huffington Post reader

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So, consumers are cutting the cord and embracing one (or more) of the many non-traditional services

…and it is not just Netflix

All of which, leads us to this webinar’s research objective

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Overarching research objective: How can cable and satellite companies maintain market share in this new and ever-changing entertainment landscape?

We will be using social intelligence to:

1. Uncover the most significant points of dissatisfaction with cable and satellite companies

2. Analyze cord cutting conversations to see what drives people to cut the cord and how cable/satellite companies can leverage these drivers

3. Analyze cord cutting conversations to see why people hesitate to cut the cord and how to leverage these points of hesitation in marketing

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The value social data brings

*Source: Gartner

By 2015, the 20% of enterprises that employ social media beyond marketing will lead their industries in revenue growth.*

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Are cable and satellite players destined to fail?

Cable and satellite companies can still prove they are relevant to consumers, if they take the right steps

Drivers of switching to non-traditional

services

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Creating competitive differentiation

Drivers of staying with cable and satellite providers

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Why are customers currently cutting the cord and switching to non-traditional services?

Drivers of switching to non-traditional

services

Factors that drive cutting the cord: #1 Customers crave entertainment personalization

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“I have no problem paying for TV shows that I like, but paying per episode for shows like “Walking Dead” makes a lot more sense to me than buying a package that contains much that I don’t want.”

“What I want, and what I believe many people want is to break the practice of bundling. We want choice. Choice on what we buy.”

Paying for something they don’t use

Customers complain that current cable/satellite bundles are wasteful, as they only watch a fraction of their bundle; looking for smaller and smarter bundles

Want the ‘insert name here’ package

Want to piece together something that makes sense for them and their lifestyle

Want to buy content, not channels

People want specific content and shows, NOT channels – looking for an a la carte solution where they can choose the content that matters to them

How to combat this driver to switch: Customers crave entertainment personalization

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Proactively reach out to current customers and offer them a cheaper channel package based on their usage

‘Walk’ recommendation

‘Run’ recommendation

People are demanding a la carte packages from providers – be the provider that gives them what they want

Factors that drive cutting the cord: #2Growing distaste of providers’ business practices

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“Go ahead and try to stick it to the consumers. You’ll just cause even more folks to dump your sorry excuse for entertainment.”

“If Cable companies buy up all the streaming services-Netflix, Hulu Plus, Amazon prime, etc. I will then dump streaming, and go back to watching my massive DVD collection. Cable will not get another cent out of me.”

Feeling used and abused

Prices continue to go up as usage restrictions increase, tech problems increase, content quality goes down, customer service goes down, etc.

Anti-big business movement

Perception that cable/satellite companies are greedy, monopolize the industry, and take advantage of their customers for the sake of profits

Want to fight ‘the man’

Younger consumers want to find unique, niche entertainment offerings vs. commoditized, mass-consumed TV content

How to combat this driver to switch: Growing distaste of providers’ business practices

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Proactively reach out to current customers and offer them a cheaper channel package based on their usage and their watching habits to engender people to the cable or satellite brand.



Run an online campaign with a handful of online influencers who claimed they wouldn’t switch to cable/satellite ‘even if it were free’. Give them free service for a year as you roll out some of the consumer-facing initiatives in this presentation, in return for 4 blog posts.

Factors that drive cutting the cord: #3Original content drives affinity

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"For the amount of money one pays for it ($100 or more a month, Time Warner Cable), it really isn't worth it. What original programming is on it?"

“Orange is the New Black is an extraordinarily good show. If Netflix can maintain this level of quality, they will become a ‘must subscribe’ service."

Decrease in TV content’s quality

Complaints of diminishing, quality content of cable/satellite TV, especially with the increase of reality shows and regurgitation of old ideas

Better value for high-caliber content

Web-only channels have started following the “HBO model” and creating their own critically acclaimed shows such as House of Cards - and offering this content for a fraction of the cost

Original content on their own terms

Applauded for offering high quality, original content with flexible viewing options

How to combat this driver to switch: Original content drives affinity

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Besides HBO GO®, which offers high-caliber, high-budget shows, also have a separate option to purchase HBO ONLY for online and mobile viewing at a reduced cost (separate from the in-home cable subscription)



Offer proprietary content to compete with “can’t miss” streaming shows and consider releasing whole seasons at once (a la Netflix) to appease binge TV watchers.

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How can cable and satellite companies leverage their strengths to retain current customers and win back cord cutters?

Drivers of staying with cable and satellite

providers

Barriers to cutting the cord: #1Cord cutting can be time-consuming and confusing

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“Be prepared to deal with connection issues that cannot be solved, no matter how many hours you spend on the phone"

“Its easy to me but I could never convince my parents to do this...they like their single remote and single interface."

Too many technical ‘unknowns’

Confusion about how to set-up their own entertainment system, what hardware they need, how much internet bandwidth they need

Streaming problems and outages

Cord cutters face long buffering times, bad connectivity, and frequent service outages or glitches

Single remote, single interface

Want a seamless entertainment experience with one remote and one interface. They don’t want to work to watch content

How cable providers can leverage this barrier to switching:Cord cutting can be time consuming and confusing

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Offer a “Welcome Back” offer or limited package to cord cutters who are dissatisfied with the lack of support they receive with non-traditional services.



Enhance support to truly make it a value-add, including 24/7 digital support and same day in-home support visits for customers who cannot be helped via the other support channels.

Barriers to cutting the cord: #2Cord cutting is deceivingly expensive

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“I've thought about cutting the cord but when I do the math, I'm really not saving much. Cutting the cord does NOT involve cutting the internet cord.”

“How much do the monthly fees and ‘pay once’ shows add up to?”

Costs add up

Customers have to cobble together services and hardware to match the content and utility on cable or satellite

Rarely consider hardware investments

Cord cutters usually don't consider hardware investments into their 'savings calculations', which means they end up overestimating their savings

Increased internet costs

Many complain that they had to 'unbundle' their current TV/internet package or get a higher tier of service

How to leverage this barrier to switching:Cord cutting is deceivingly expensive

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On targeted cord cutting forums, seed a cost-comparison matrix that shows the price of branded cable/satellite services vs. the cost of equivalent non-traditional packages.



Send a highly visual, direct mailer to anyone who has canceled service, that includes the cost comparison matrix and a list of the value adds that you get with traditional providers.

Barriers to cutting the cord: #3 Emotional connection to live events

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“Try catching your local team on the Internet. Even if you do subscribe to the streaming package of your favorite sport, it is likely blacked out.”

“If I can get the HD live NFL games somewhere else, I will gladly cut the cable. But I can't. So I trimmed the package as best as I could, just basic TV + sport."

Keeping minimum service for events

Many subscribe to streaming services, but keep a basic TV bundle so that they can watch live sports and special events.

Worried about being ‘left behind’

Worried that they will miss the ‘water cooler’ moments the day after a major event or game, or that the event will be spoiled for them via social media

Live streaming in its infancy

Some online posters suggest live streaming options, but others quickly come back noting that live streaming has not been perfected

How to leverage this barrier to switching:Emotional connection to live events

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Create online messaging that touches on the emotional experiences people related to live TV – the water cooler moments, having people over to watch a live event, etc.



Offer same day, free installation on the day before or the day of major live events (e.g. Oscars, Super Bowl, Macy’s Day Parade) to lure back cord cutters.

Cable & satellite companies need to listen to their customers

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Thank youKara ClarkSenior [email protected]

For more information on our solutions, visit sdl.com/SI or email [email protected]