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

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Join Kara Clark, Senior Ethnographer at SDL, as she walks you through an analysis of how traditional cable and satellite companies can combat cord cutting and even offer consumers greater value, by …

Join Kara Clark, Senior Ethnographer at SDL, as she walks you through an analysis of how traditional cable and satellite companies can combat cord cutting and even offer consumers greater value, by understanding what drives the switch. By using predictive social measures we will reveal arguably the most important trend in entertainment right now, cord cutting and its effects on established companies.

In this session, you’ll learn:
• About a new, proprietary approach to measuring and driving content engagement strategies using social data
• An innovative, real-time approach to analyzing industry trends
• Best practices for cable and satellite companies in terms of retaining their customer base in this new and ever changing entertainment landscape

Published in: Business, Technology

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  • Hi, everyone thanks so much for attending! My name is Kara Clark, I am a senior ethnographer at SDL, and today I want to talk to you about a growing entertainment phenomenon - Cord Cutting. Two weeks ago, my colleagues Lisa Tanaka and Stacey Megoloff, presented a webinar that analyzed how original content on Netflix and on HBO changed consumer’s commitment levels to the services. They found that Netflix as a brand had higher commitment – but interestingly they found that original content was only a small driver of the commitment to Netflix. They found that the real driver was the flexibility that Netflix offered – the chance to binge watch a whole season in one day, to watch a whole episode without commercials, to be able to watch a show at 1am instead of having to tune in at 8 every night. In short, Netflix offers CHOICE – content when, how, and where you it. Content on YOUR terms. But, it made me wonder - If consumers truly enjoy the flexibility that streaming services like Netflix offer – then how much longer will consumers realistically stay with their current cable and satellite providers? Are we going to see more people cutting the cable cord and moving to streaming or pay-for-content services? And most importantly – what can cable and satellite companies do to keep customers and retain market share in this new landscape. These are some of the questions I hope to answer through this webinar.
  • Lets start with the most obvious question – what is cord cutting?This is the most accepted definition – cord cutting is the process of cutting (or canceling) expensive cable TV or sattelite TV services in order to switch to a free or low cost option. And cord cutting can come in many different forms – some people cut the cord and get modern-day rabbit ear antennas so they can watch free over-the-air channels, others stream content through services like Netflix and Hulu, some download consumers shows illegally from sites like the Pirate Bay, and others only buy the specific episodes or seasons they want to watch, through services like iTunes or Amazon Instant Video. All of the people I just described are cord cutters – they ‘cut the cord’ to traditional cable and satellite providers and moved to cheaper, non-traditional entertainment options.
  • Now that we know what cord cutting is, lets address a more important question – why analyze cord cutters? Why are they important to understand?For this answer – we go all the way back to 1928….Television was introduced in the United States in 1928, but 20 years later, we really entered the more modern era of what we think of as television, when the first cable service was offered. People had more choices in content, so they could be pickier in terms of what content they watched. Consumer choice increased even more as satellite television was introduced in 1962. People were willing to pay more for the growing choice in content that cable and satellite offered – and services subscriptions grew rapidly. Then in 1972, HBO was introduced, and for the first time consumers had access to high-quality, high-budget premium content – growing their choices even more and their commitment to televisioneven more. People LIKE choices and until 2007, traditional players like cable and satellite were the ones offering the most choice. But in 2007 that changed. In 2007 Netflix began offering instant video services, streamed through consumer’s computers or gaming consoles. For the first time, there wasn’t just more choice in terms of content. There was more choice in terms of HOW and WHEN people could watch their content. Don’t like commercials? No problem, Netflix doesn’t have any. Can’t watch your favorite show at 8pm every Friday every week? Catch up with Netflix on your own time. Can’t watch with friends? Its okay, you can watch with a friend half way across the world, in tandem via Netflix. And because consumers love choice – they are increasingly starting to move away from some of the traditional cable and satellite providers, and started to cut the cord, moving to services like Netflix and now Hulu, Amazon instant video, Chromecast, and a growing number of other streaming and pay-as-you-go services.
  • As I have watched this trend unfold and even experienced it myself as a cord cutter, the biggest question that I had was – what about the cable and satellite companies? What about Comcast? Direct TV? Dish Network? Time Warner Cable? How are they faring in the market? How can they survive in the entertainment industry as players like Hulu and Netflix slowly (or not so slowly) eat away at their market share? After doing some desk research – the outlook looked grim. I think one of the most striking examples I found is Time Warner Cable. They are facing two big problems right now – which most economists and industry analysts blame on the growing cord cutting trend. The first problem Times Warner Cable is facing is a loss of current subscribers. In just the 2nd quarter of 2013, the company lost 196,000 cable customers. That’s an increase in customer churn of 18% over the same quarter last year. The second is arguably more detrimental. As cord cutting increases and as younger Millennials (described as ‘Cord Nevers’ – people that have never bought traditional cable or satellite services) enter the market – new subscriptions are also waning. In Q2 of 2013, Time Warner only had 8,000 new cable subscriptions, a decrease of over 86% from the same quarter last year.
  • But as I looked at some of these stark statistics about Time Warner, I wondered – is it JUST Time Warner Cable that is losing market share? Are all of the Time Warner customers moving over to Comcast? Or to Dish? But, as I dug deeper into the data I found that all four providers were experiencing similar losses in current cable subscribers and in new customer acquisitions. Comcast lost over 400,000 subscribers in the year starting Q2 2011. This trend continued into 2013, with another 159,000+ subscribers lost in Q2 of this year. DirectTV saw similar losses – they lost 84,000 subscribers in Q2 2013 and admitted that they will need to substantially increase subscription costs in 2014, which has caused many people in social media to discuss cutting the cord in the upcoming yearFinally, Dish network saw a 78,000 drop in total subscriptions in Q2 2013So that means that in the three months of Q2 of 2013, if we combine all of the subscriptions lost between the four competitors, that is 517,000 cable and satellite customers moving away form their cable or satellite provider.
  • After looking at the statistics I just shared with you and after qualitatively reading through 1000’s of the social media posts– the answer was clear. Consumers are fed-up with cable and satellite companies. And worse yet, some consumers in the social media space claim that these companies are too stuck in their ways and that the brands will not (or CANNOT) change their ways. As I was going through the data, I noted a quote from a A Huffington Post reader, who I think describes the situation and the sentiment of many of the other posters perfectly. He said, “Cable is an obsolete, grotesque monster that has learned to gobble up far more money then it is worth.” While this may seem like a harsh quote – this sentiment was shared online over and over again.
  • So, what are unsatisfied consumers doing in response? What happened to those 500,000 subscribers the four major providers lost in Q2 of 2013? Well, many economists and industry analysts believe these customers are cutting the cord, canceling their cable and satellite service, and embracing one (or usually more) of the non-traditional content services out there – from streaming services like Netflix and Hulu, to pay-per-view services like Amazon Instant Video and iTunes, to illegal download sites like the infamous Pirate Bay. Some are even pulling their rabbit ears out of the closet and strapping that to the TV.
  • All of this leads us to this research’s main objective – I wanted to understand how cable and satellite companies could fight back against the cord cutting phenomenon. How can they maintain market share in this ever-changing industry? How can they change their content models, their technology, their customer support, their targeting and outreach, etc. to appeal to and win back these cord cutters? We used social intelligence to answer this question and provide actionable recommendations for cable and satellite companies. More specifically, we will be using social intelligence to do three things: Uncover the biggest points of dissatisfaction with cable and satellite companiesWe all have experienced a love/hate relationship with our cable providers. But where does that distaste come from? In the customer journey – from becoming aware of a cable or satellite company to eventually committing to their brand for the long term, where are customers getting caught up? Where in this journey are customers most likely to make the cord cutting decision? By understanding WHEN in the journey this occurs, we can recommend the right time to target these dissatisfied customers. Analyze cord cutting conversations to see what drives people to cut the cord and how cable/satellite companies can leverage these drivers What is so appealing about streaming and on-demand entertainment services? And most importantly, how can cable and satellite companies leverage these services’ best practices in their own product development, service offering, and marketing?Third and Finally, we will analyze cord cutting conversations to see why people hesitate to cut the cord and how to leverage these points of hesitation in marketingWhat are some of those nagging worries that keep people from cutting the cord or that make them switch back to their traditional services? By understanding these sticking points, we can recommend effective marketing and outreach that leverages these ‘cord cutting’ fears.
  • But, before we dive into the data and the answers to those research questions, lets talk about why we are using social intelligence to address our research objective and answer our key questions? Why not focus groups? Or a survey? Or even an in-home ethnography watching people consume these streaming services?The answer is – Social intelligence gives you a contextual view into your customers experience, that you simply can’t get otherwise. You can collect data in real-time, without leaving your office. You can find competitive intelligence at a fraction of the cost. You can look back at past events – launches, campaigns – and get targated feedback on your initiatives. You can get content that is not biased by the moderator or by the fact that the respondent wants to please that moderator. In short, it addresses many of the pain points that we deal with on a daily basis as researchers – giving us insights cheaper, smarter, faster. But the biggest reason to use social? The insights drive revenue, which is something the majority of us are concerned with. On their website, Gartner predicted that by 2015, the 20% of companies that use social (beyond outreach) will LEAD their respective industries in revenue growth. that’s powerful. source: published on the Gartner website: http://www.gartner.com/technology/topics/social-media.jsp
  • So, lets revisit our objective– with an ever increasing number of people cutting the cord, are cable and sattelite brands destined to fail? Or can they learn from these new competitors and rebrand themselves and their product offerings to fit consumer’s new needs and wants?
  • I don’t think they are destined to fail – the data shows that with the right changes to their produict offerings and business models, they can still prove consumers wrong, retain current customers, and even win-back current cord cutters. But to do this – they need to truly differentiate themselves, by widening their competitive lens and starting to proactively compete against these non-traditional players. To create this new compeitive differentiation, they need to understand two things – The first thing they need to understand are the drivers of switching to non-traditional services. What do consumers get from services like Netflix and Hulu that they can’t get from cable and satellite? What unmet consumer needs are these services filling? Once they understand these unmet needs, they can create innovative offerings that fill those needs. The second thing they need to understand is what is driving current customers (or as I see them, potential cord cutters) to stay with their current cable and satellite providers. Cable and satellite companies can leverage these drivers in their messaging and outreach, to remind people why they should stay. We looked through 1000s of social media posts to answer these two questions and we created actionable recommendations for cable and satellite companies based on these findings. Lets take a look.
  • First, lets start with the drivers of switching to non-traditional services. The key question that we tried to answer was “What are some of the entertainment needs and wants that customers currently fill with non-traditional services like Netflix and Hulu?” We found three primary drivers.
  • The first cord cutting driver is entertainment personalization. Consumers described how the traditional cable and satellite models just didn’t work with their lifestyle. They want a service that fits their families unique content needs, their unique schedule, their unique TV watching styles – they claimed that cable and sattelite’s current models were too rigid and ‘cookie cutter’ to meet these needs. 1. The biggest complaint we saw in terms of lack of personalization, was the fact that many customers are paying for something that they don’t use. With cable and sattelite providers that get hundreds of channels, but many customers only watch 5-10 of those channels. They are only watching a fraction of the channel bundle they are paying for – but still paying full price. In the data, the term ‘smaller and smarter bundles’ kept coming up – this is what consumers are literally demanding in the social media space. 2. That brings us to the second point – customers are looking for a ‘insert name here’ package. They want a customized, a la carte package where they choose the channels or the content they actually want to watch and only pay for them. They want to get the three Disney channels for their children and FX for must see dramas – and JUST that. Or they want to pay for the time that they watch – so someone who watches 5 hours of TV a day pays more then the family that only watches 2 hours of TV a day. They want cable and sattelite companies to work with them and help them create the right offering for them, not the ‘take it or leave it’ options many providers have today. 3. Finally, consumers want to buy content, not channels. Many consumers, like the one who wrote the verbatim at the bottom of the page, only want to pay for the shows that they watch. Many of these consumers complain that the idea of ‘channels’ is too outdated. For example, the consumer at the bottom of the slide describes how they want to buy all of the seasons of the Walking Dead – not the whole entire AMC channel. Players like Netflix and Amazon Instant Video offer these pay-for-content models – while traditional cable and satellite providers do not. These personalization and customization needs are driving consumers to cobble together their own personalized entertainment package using non-traditional services.
  • So, how can cable and satellite companies combat this driver to switch and retain customers? We developed two recommendations – one ‘walk recommendation’, that is the low-hanging fruit, a more near-term goal. We also created a ‘run recommendation’ which is a more long-term investment heavy recommendation, but that is also more impacftul. We realize that some of the Run recommendations will be expensive and logistically difficult to implement, but we wanted to provide a ‘best case, game changing scenario. WALK: The walk recommendation is to proactively reach out to current customers and offer them a cheaper, already existing bundle based on their usage and watching habits. If there is a record of what they watch on a day-to-day basis, the company can analyze the watching habits and choose the cheapest, but most effective package. If they don’t have that kind of data, they could develop an interactive app on their website, which will allow customers to track their watching habits for a day or a week, and the app suggests a cheaper package. While this may seem counter-intuitive to the brands, it will actually create loyalty and advocacy online and offline, while prove to customers that the company truly has the customer’s best interest in mind. RUN: The run recommendation is to actually give customers exactly what they are asking for – be the first cable or satellite provider in the United States to offer unbundled, pay-per-channel, a la carte packages that consumers can customize. I know this is a stretch goal, especially because of current content licensing models, but based on the industry’s positions and consumer comments, it seems to be a necessary change for these brands to survive. I think one cord cutter described this growing sentiment perfectly – “If I have to choose netween everything or nothing, I will continue to choose nothing.”
  • The second cord cutting driver is a growing distaste for cable and satellite companies business practices. Its no secret that people hate cable and sattellite companies – I literally can’t go through my own Facebook feed without someone complaining about their increasing bills or lackluster customer service. We saw three big themes emerage in the data though…The biggest driver of this distaste is a general feeling of being used and abused by cable and satellite companies. Consumers complain that the price of service and the fees keep increasing – some users complained that their bill has increased over 300% since they originally signed up for service. What really makes consumers feel abused though – is that as these prices continue to rise, tech problems continue to increase, content quality continues to go down, and customer service levels are at an all time low. Customers expect a premium service for a premium price. The second thing we noticed was a growing anti-big business movement, especially among Millennials. There is this perception that cable and satellite companies are greedy, that a few big players monopolize the industry, and because of their position of power in the industry, they frequently take advantage of their customers and their wallets. These customers are seeking more customer-centric businesses, like netflix and Hulu. Finally, we have consumers that want to ‘fight the man’, in this case, big satellite and cable companies. They don’t want to consume mass produced, commoditized content from big businesses – they want to find unique, niche entertainment offerings, through foreign content and original content, which we will discuss further in the deck. Many of the consumers having these conversations online, explicitly say that they wouldn’t get cable or sattellite, even if it was free, because of the aforementioned reasons. That is a hard sentiment or stance to change.
  • So, how can cable and satellite companies combat this driver? WALK: Interestingly, the ‘walk recommendation’ for this driver is the same as the last, but for different reasons. Cable and satellite companies can poriactively reach out to consumers to help them lower their bill – not because it will help with entertainment customization, but because it will show that they care about their customers over profits, that they care about providing the right service at the right cost, not just lining their pockets. This will engender people to the brand and fight the negative sitgmas being thrown around in social media. RUN: In terms of a more long term goal, we suggest leveraging some of these negative online influencers. Cable and satellite companies can reach out to cord cutting influencers online – of which there are MANY – especially the ones that say they wouldn’t switch to cable or satellite, even if it was free. Offer them just that – give them free service for a year, as some of these consumer-centric initiatives in this presentation are rolled out. Ask them for 4 blog posts in return for the service, evaluating the new services they are offering. More importantly, ask for their feedback and their input. Both of these tactics will show them a more customer focused company, that is willing to change and to listen to user’s needs.
  • The third and final driver of cord cutting is the growth of high quality original content on streaming services. Overwhelmingly people online are complaining about the degrading quality of TV content – the biggest complaint is the explosive rise of Reality TV content, but people also complained about re-used ideas, continuous re-runs, the shortening seasons of most shows, and the increase of commercials taking up content time. All in all, these consumers are NOT happy with the current fare on cable or satellite TV, with the exception of some of the major dramas – Breaking Bad, the Walking Dead, Mad Men, game of Thrones, and Sons of Anarchy. In response to this lack of quality cable, consumers started to try out some of the original content on Netflix and Hulu. These services started following the HBO model and created their own critically acclaimed shows – from House of Cards and Orange is the New Black on Netflix, to a wider variety of niche shows like Misfits and the Yard on Hulu. These shows are starting to offer the same production value and star-studded cast lists for a fraction of the cost. In fact, House of Cards just won its first Emmy – even though they were pitted against major network TV shows. Most of all – and this is something Lisa and Stacey touched on in their webinar two weeks ago – is that consumers can watch this high quality content on their own terms, on their own time. Most of these original shows are released all at once, to allow for ‘binge watching’, which has proved to be VERY popular with streaming audiences. Another perk of releasing the entire season at once, and one that I am partifularly fond of - No cliffhangers – they can go right on to the next episode.
  • So, how can cable and satellite companies combat this driver to switch?Walk: In terms of a Walk recommendation, the data shows that it would be powerful to offer premium content from HBO, on consumers terms. Currently customers can get HBO GO, which allows them to watch HBO content through their console, at a reduced price – BUT the problem is that you need to actually subscribe to cable or satellite to access these services – not only do you have to subscribe, but you usually have to subscribe to one of the highest and most expensive service tiers. Our suggestion is to allow customers to get HBO, without a cable or satellite subscription, with only a monthly fee. Interestingly, Comcast announced on Monday that they would be offering HBO go with their cheapest TV package and basic internet, instead of having to purchase the highest tier of the TV bundles. While this is definitely a step in the right direction, and has received positive feedback from online users so far, we feel it can be taken even farther. Run: The run recommendation is admittedly more lofty. The data shows that exclusive content drives affinity, so we believe that if specific providers, say Comcast or Dish Network, produced their own original, high quality, can’t miss TV shows – that provider will have a distinct advantage in the cable and satellite market and against players like Netflix and HULU. If they do decide to produce original content, releasing entire season to allow for binge watching is suggested.
  • Now that we have gone over the drivers to cut the cord, lets look at the other side of the equation. What drives consumers to, lets say, keep the cord intact. What drives them to stay with their current cable and satellite provider? What scares them about cutting the cord? Once we know this – we can make recommendations on how to leverage those themes and those cord cutting fears in marketing and competitive messaging. Again, we saw three primary drivers to STAY with cable and satellite providers.
  • The first barrier to cutting the cord is how time consuming and technically confusing the process of cutting the cord can be. I’ve actually just been through this process with my parents, who recently turned 50 and decided to cut the cord. They called me about 10 times in one night, trying to decide what services to subscribe to, what gaming console they should buy to stream through, my favorite was when my mom tried to watch her first show on netflix and it said it was buffering – I got a call and had to describe to her what ‘buffering’ was. Its been an adventure. And as I have gone through the data, I’ve seen that this is a challenge for many cord cutters – young and old alike. The first point that kept appearing in the data, is that there were simply too many ‘unknowns’ in the cord cutting process – whats the right streaming service? How much internet bandwidth do you need? What cords do you need to connect your computer to your TV? As many online posters complained – there is no follow simple to ‘how to’ for cord cutting – cord cutters are on their own. The 2nd point is problems with streaming and frequent service outages. Cord cutters complain about long buffering times, bad connectivity, frequent service outages. And more importantly, they have no one to call when they encounter these problems. Cord cutters don’t have a cable or satellite account rep to call and come fix their technical problems – again, they are on their own, THEY are their own technical support. Finally, and this was a big sticking point for my parents, is that with cord cutting you don’t get a single remote or a single interface to work with. You have 3 remotes and 2 screens and 4 different services for content – it ends up being pretty confusing and time consuming.
  • How can cable and satellite providers leverage this barrier to cord cutting?Walk: In terms of a more near-term goal, the data shows that a ‘welcome back’ offer to frustrated cord cutters could be powerful. Brands could send a special offer or a special package to the cord cutter 2-3 months after they canceled their service – this direct mail piece should touch on some of the technical frustrations cord cutters have and can describe how their brand’s customer support team could help them navigate any technical issues they have – emphasize that the consumer doesn’t need to be their own technical support guru. Run: For the run goal, we suggested enhanced customer support that will show consumers that cable and satellite customer support really is a value add. We saw many calls for 24/7 support, enhanced live chat options, and same-day in-home service calls.
  • The second barrier to cutting the cord is that it is decievingly expensive. When I cut the cord, everyone told me it would be cheaper than my current cable bill, which was a basic package for $45. I was excited – I love getting a good deal. But then I started this research – and I saw a lot of complaints about how quickly cord cutting costs could add-up and how it may even be more expensive than an equivalent package from cable and satellite providers. So, buegrudingly, I did the math. With 4 streaming services (so that I can get a well rounded library of content) and an increased internet cost of $25 dollars a month, I found I was spending $65/month to be a ‘cord cutter’. That is $20 more a month, than my old cable subscription. I found many other posters who had the same revelation that I did. Consumers noted that they had to cobble together multiple streaming services to match the same content that they would get from cable and satellite TV. They also noted that they didn’t consider the hardware investments in their savings calculations – a Roku box, a Playstation, Smart TVs – these can be expensive. Finally, people complained of increasing internet costs. They had to increase their internet bandwidth to stream their content without long buffering times. Not only did they need a higher tier of internet service, but many of them also lost the internet discount they got for bundling their internet and TV services together.
  • How can cable and satellite companies capitalize on the fact that many people are paying more to be a cord cutter?Walk: We saw a number of cost-comparison forum threads in entertainment and cord cutting forums – if a cable and satellite company could seed a cost-comparison matrix into some of these forums, that outlines some cable bundle prices vs. the price they would pay for same breadth of content as a c.ord cutter, it could answer a lot of these cost-comparison questions potential cord cutters have. Run: The run recommendation actually builds off this idea of a cost comparison matrix. The brand can send highly visual, direct mailers to those who have canceled service, that includes the cost comparison matrix, but also a list of value-adds that you get with traditional providers.
  • Finally, the third barrier to cutting the cord is an emotional connection to live events like sports games, awards shows, and news programming. 1. There were a number of semi-cord cutters online, who were using streaming services but keeping the lowest teir of cable or satellite, so they could watch live events. Many of these posters said that live events were the ONLY thing keeping them with their current provider – and some of them were asking more seasoned cord cutters to help them find a live-streaming alternative. 2. The second point about live events is this nagging feeling that you will be left behind – if you don’t watch the game tonight or you miss the Oscars, you also miss out on all of those watercooler moments next day. Sitting with your friends and family and coworkers, recapping what happened, talking about your favorite parts. Even worse – is the fear that through these watercooler moments or through social media, the end of the game or the award winning actress for best drama will be spoiled for you, if you don’t watch the event ASAP. 3. Finally, even avid cord cutters admit that there isn’t a great live streaming option right now – its still in its infancy. And who wants the game to buffer during the final quarter? Or the connection to fail right before they announce miss America?
  • How can brands leverage this emotional connection people have to watching and rehashing live events?Walk: The first recommendation is to highlight watching live events as an emotional experience – in messaging, brands can touch on cooking the whole day before a big game and having people over, highlight the moment that you talk about an awards show with your coworkers over coffee the next morning – remind people WHY live events matter to them and highlight them as a social and emotional experience – not just ‘watching TV’ Run: As far as the run recommendation, we saw a number of posts from cord cutters complaining about not being able to watch a major event that night or complaining that they have to going to a local bar or a friend’s house to watch it. Some of these posters actually say that they wish they had cable or satellite TV preceding these events. We suggest that cable and satellite companies take advantage of consumers need for instant gratification, and offer same day, free installation of services the day before or the day of an event, to lure back cord cutters. Brands can try getting them in the heat of the moment, when these emotional drivers are strongest.
  • So – we just went through the primary drivers of cord cutting and the primary drivers of staying with their current cable and satellite providers – and there is one underlying theme. The theme is strive to be a customer-centric company, driven by the needs and the wants of consumers, not the legacy of old business models. This is what netflix and Hulu and other providers provide. Cable and satellite companies need to ask customers questions, listen to them, and learn from them if they are going to differentiate themselves from these up and coming non-traditional providers.
  • Thanks so much for attending today – I would now like to open up for questions!
  • Transcript

    • 1. Have You ‘Cut the Cord’ Yet? How Can Cable and Satellite Providers Survive the ‘Cord Cutting’ Trend? SDL Proprietary and Confidential
    • 2. What is cord cutting? Definition: The process of cutting expensive cable TV or satellite TV connections in order to change to a free or low cost entertainment option 2
    • 3. Why analyze cord cutters? 1972 HBO (premium content) 2007 For the first time in almost 80 years, someone challenged the traditional content model and a decrease in commitment to traditional providers began 1962 Satellite introduced in the US 1948 Cable introduced in the US 1928 TV introduced in the US Increasing commitment (subscribers) to traditional content providers as CHOICE increases 3
    • 4. Are cord cutters really a threat to cable and satellite companies? “Any investor paying attention knows that cable TV is dying a slow death.” -Jeff Reeves, Slant Magazine 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 Data pulled from Time Warner Cable’s financial reporting press releases 4
    • 5. 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 2013 Kristina 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 5
    • 6. 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 6
    • 7. So, consumers are cutting the cord and embracing one (or more) of the many non-traditional services …and it is not just Netflix 7
    • 8. All of which, leads us to this webinar’s research objective 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 8
    • 9. The value social data brings By 2015, the 20% of enterprises that employ social media beyond marketing will lead their industries in revenue growth.* *Source: Gartner 9 9
    • 10. Are cable and satellite players destined to fail? 10
    • 11. Cable and satellite companies can still prove they are relevant to consumers, if they take the right steps Creating competitive differentiation Drivers of switching to non-traditional services Drivers of staying with cable and satellite providers 11
    • 12. Drivers of switching to non-traditional services Why are customers currently cutting the cord and switching to non-traditional services? 12
    • 13. Factors that drive cutting the cord: #1 Customers crave entertainment personalization Paying for something they don’t use Want the ‘insert name here’ package 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 to piece together something that makes sense for them and their lifestyle “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.” 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 “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.” 13
    • 14. How to combat this driver to switch: Customers crave entertainment personalization ‘Walk’ recommendation Proactively reach out to current customers and offer them a cheaper channel package based on their usage ‘Run’ recommendation People are demanding a la carte packages from providers – be the provider that gives them what they want 14
    • 15. Factors that drive cutting the cord: #2 Growing distaste of providers’ business practices Feeling used and abused Anti-big business movement Want to fight ‘the man’ Prices continue to go up as usage restrictions increase, tech problems increase, content quality goes down, customer service goes down, etc. Perception that cable/satellite companies are greedy, monopolize the industry, and take advantage of their customers for the sake of profits Younger consumers want to find unique, niche entertainment offerings vs. commoditized, mass-consumed TV content “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.” 15
    • 16. How to combat this driver to switch: Growing distaste of providers’ business practices ‘Walk’ recommendation 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’ recommendation 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. 16
    • 17. Factors that drive cutting the cord: #3 Original content drives affinity Decrease in TV content’s quality Better value for high-caliber content Original content on their own terms Complaints of diminishing, quality content of cable/satellite TV, especially with the increase of reality shows and regurgitation of old ideas 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 Applauded for offering high quality, original content with flexible viewing options "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." 17
    • 18. How to combat this driver to switch: Original content drives affinity ‘Walk’ recommendation 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) ‘Run’ recommendation 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. 18
    • 19. Drivers of staying with cable and satellite providers How can cable and satellite companies leverage their strengths to retain current customers and win back cord cutters? 19
    • 20. Barriers to cutting the cord: #1 Cord cutting can be time-consuming and confusing Too many technical ‘unknowns’ Streaming problems and outages Single remote, single interface Confusion about how to set-up their own entertainment system, what hardware they need, how much internet bandwidth they need Cord cutters face long buffering times, bad connectivity, and frequent service outages or glitches Want a seamless entertainment experience with one remote and one interface. They don‟t want to work to watch content “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." 20
    • 21. How cable providers can leverage this barrier to switching: Cord cutting can be time consuming and confusing ‘Walk’ recommendation 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. ‘Run’ recommendation 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. 21
    • 22. Barriers to cutting the cord: #2 Cord cutting is deceivingly expensive Costs add up Rarely consider hardware investments Increased internet costs Customers have to cobble together services and hardware to match the content and utility on cable or satellite Cord cutters usually don't consider hardware investments into their 'savings calculations', which means they end up overestimating their savings Many complain that they had to 'unbundle' their current TV/internet package or get a higher tier of service “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?” 22
    • 23. How to leverage this barrier to switching: Cord cutting is deceivingly expensive ‘Walk’ recommendation 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. ‘Run’ recommendation 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. 23
    • 24. Barriers to cutting the cord: #3 Emotional connection to live events Keeping minimum service for events Worried about being ‘left behind’ Live streaming in its infancy Many subscribe to streaming services, but keep a basic TV bundle so that they can watch live sports and special events. 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 Some online posters suggest live streaming options, but others quickly come back noting that live streaming has not been perfected “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." 24
    • 25. How to leverage this barrier to switching: Emotional connection to live events ‘Walk’ recommendation 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. ‘Run’ recommendation 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. 25
    • 26. Cable & satellite companies need to listen to their customers 26
    • 27. Thank you Kara Clark Senior Ethnographer kclark@sdl.com For more information on our solutions, visit sdl.com/SI or email simarketing@sdl.com