Video Churn: A Two-Way Street

According to Parks Associates, roughly one-fourth of pay TV subscribers in U.S. broadband households made changes to their pay TV ...

OTT Churn Rate Holds Steady at 19%
OTT Churn Rate Holds Steady at 19%
According to Parks Associates, roughly one-fourth of pay TV subscribers in U.S. broadband households made changes to their pay TV service over the past 12 months, although upgrades were nearly as significant as downgrades. The research house says 11% of pay TV subscribers downgraded services and 9% upgraded services over the past 12 months.

"Some consumers are definitely looking for ways to cut costs. With the hype around new OTT video services, people are considering their options in video services," wrote Brett Sappington, Parks' director of research. "At the same time, a notable portion of consumers are upgrading their pay TV services to higher tiers or premium features."

Pay TV penetration has eroded slightly over the past few years among households with broadband, dropping from 87% in Q3 2011 to 85% in Q2 2015. The percentage of consumers who have never subscribed to a pay TV service has held steady since 2012. In the second quarter of 2015, 4% of pay TV users subscribed for the first time, and 8% switched to a new TV service provider.

"Pay TV adoption rates posted a small decline over the past four years," Sappington said. "The recent heightened anxiety about cord cutting and cord shaving centers upon worries that this shift is impacting overall pay TV revenues. The overall volume of video consumed across platforms is as high today as it has ever been. As that consumption shifts to new devices and new content sources, revenues will inevitably shift as well."

In contrast to pay TV services, broadband services are seeing a greater interest in consumer upgrades than in downgrades. While 10% of broadband households intend to upgrade to a faster broadband speed, only 4% plan to downgrade in order to save money. Over the past 12 months, 13% of broadband households received a higher speed broadband service from their provider without paying a higher price. One-quarter of those switching service providers did so in order to obtain a faster service at a comparable price.

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