Pay-TV providers contemplating the prospect of offering “skinny bundles” of fewer TV channels face a difficult balancing act, according to skinny bundle research from Altman Vilandrie & Co.
So-called ¨skinny bundles¨ composed of channels selected specifically to meet the viewing preferences of specific subscriber groups have the potential to attract itinerant younger viewers, according to Altman Vilandrie & Co.’s seventh annual consumer video survey. But pay-TV providers offering that option risk cannibalizing their existing pay-TV customer bases, the market research provider highlights in a press release about the skinny bundle research.
The reason is that two-thirds of older pay-TV subscribers – providers’ most reliable subscribers – believe they’re wasting money paying for channels they don’t use.
Skinny Bundle Research on Young Adults
Young adults subscribe to traditional pay-TV services at much lower rates than older age groups, Altman Vilandrie points out. Furthermore, young adults are prominent among those who never subscribed to a pay-TV service, those who are cutting the cord on their pay-TV services, and those who are shaving usage by downgrading to lower cost service plans.
Young viewers are looking online for cheaper alternatives to traditional pay-TV service packages. Three-quarters of 18-34 year olds watch streaming OTT video from Netflix, Amazon Prime or Hulu Plus at least once a week. That’s far greater than the 22% of those ages 55 and up.
Furthermore, nearly 80% of 18-24 year olds watch TV shows or movies on the Internet, up from 60% five years ago, according to Altman & Vilandrie.
Skinny bundles offers a means for pay-TV providers to attract greater numbers of young adults, according to Altman Vilandrie. More than 7 in 10 younger viewers (18-24) said they would consider subscribing to a pay-TV service if more affordable viewing packages aligned with their personal viewing tastes were available, according to the survey results.
SlingTV and PlayStation Vue have launched skinny bundles of OTT live TV channels aimed at attracting price-conscious viewers and Hulu is expected to do so soon, the market research consultancy notes. In addition, Dish has added skinny bundles to its mainstream satellite pay-TV platform.
Skinny Bundle Research on Older Adults
Complicating the prospect of pay-TV providers offering skinny bundles, however, is another important finding from Altman Vilandrie’s research: More than 6 in 10 (63%) of older pay-TV subscribers (55 and older) said they are wasting money on service packages that include many channels they don’t watch. That was higher than that for all other age group and opens up the prospect that pay-TV providers offering skinny bundles may cannibalize their existing subscriber bases.
Pay-TV subscribers 55 and up also are much less likely than younger age groups to switch to OTT TV and video services – just 30% watch TV shows or movies online weekly. Combined, these factors could make the idea of downsizing to skinny bundles an attractive alternative for older viewers, which lends credence to the prospect of cannibalization, Altman & Vilandrie points out.
“The surprising level of dissatisfaction with unwanted channels we found among older subscribers shows the difficult balancing act skinny bundles create for pay TV providers,” Jonathan Hurd, the Altman & Vilandrie director who led the market study, was quoted as saying.
“It is critical for providers to design optimal bundles that maximize adoption of new subscribers while simultaneously limiting appeal to existing customers – no small task, based on simulations we’ve run using the survey findings.”
Other key findings from the survey, which was sponsored by Survey Sampling International, include:
- Channel surfers – Further highlighting age-related differences, when respondents do not “have a plan” of what to watch, 60% of 18-24-year-olds say they are more likely to turn to online video sources like Netflix and Amazon while 87% of those age 55+ turn to traditional TV.
- Sharing economy – 13% of online video consumer respondents “borrow” the account of someone outside their household for at least one paid online video service, and only 38% of these account borrowers report being likely to subscribe to their own account within the next year.
- TV Everywhere still nowhere – Subscribers’ awareness of TV Everywhere (the ability to watch programming, generally for free, from their pay TV provider on devices other than a TV such as a mobile phone or tablet) remains low at 36%, unchanged since 2013.
- Cable or broadcast? – Younger consumers are less likely than older consumers to know whether channels are broadcast or cable—for example, only about a third of 18-24-year-olds know that ESPN, USA, and AMC are not broadcast channels.