JD Power: Better OTT Drives Cord Cutting

According to J.D. Power, overall satisfaction with alternative video services such as streaming and transactional-based OTT (over-the-top) ...

JD Power: Canadian Cable TV at Risk for Cord-Cutting
JD Power: Canadian Cable TV at Risk for Cord-Cutting

According to J.D. Power, overall satisfaction with alternative video services such as streaming and transactional-based OTT (over-the-top) offerings is considerably higher than it is with traditional pay TV service, spurring an increase in cord cutting from 2015.

The related studies are the J.D. Power 2016 U.S. Residential Television Service Provider Satisfaction Study; the J.D. Power 2016 U.S. Residential Internet Service Provider Satisfaction Study; and the J.D. Power 2016 U.S. Residential Telephone Service Provider Satisfaction Study.

The annual wireline studies, now in their 15th year, evaluate residential customers' experiences with TV, Internet and phone services in four geographical regions: East, South, North Central and West. The ISP and telephone studies measure customer satisfaction across five factors: network performance and reliability; cost of service; billing; communication; and customer service. The TV study measures satisfaction in those same five factors plus a sixth: programming. Satisfaction is calculated on a 1,000-point scale.

The TV study indicated that, compared with pay TV service providers, satisfaction is significantly higher with paid streaming video services like Netflix, Amazon and Hulu; skinny bundle offerings like SlingTV and PlayStation Vue; and programming apps like HBO Go.

For example, customers rate their primary alternative video service higher than their TV service for the overall experience (7.92 vs. 7.18, respectively, on a 10-point scale), which is largely driven by much higher ratings for the overall cost of service experience (7.99 vs. 6.42). Customers also rate their primary alternative video service higher than their TV service for the overall performance and reliability (7.98 vs. 7.82), programming (7.87 vs. 7.76) and billing (8.04 vs. 7.54) experiences.

Subsequently, with relatively low prices and increasing rates of adoption, alternative video services are helping drive the cord-cutting trend. Some 63% of customers surveyed have used an alternative video service in the previous year, up from 58% in 2015. Additionally, 73% of customers who plan to cut the cord on TV service in the next year indicate they will use an alternative video service.

"This finding partly reflects age demographics since younger customers are more likely to use alternative video services than older customers, and younger customers are more satisfied with alternative TV service than older customers," said Kirk Parsons, senior director and technology, media & telecom practice leader at J.D. Power. "Despite their higher satisfaction, customers who have used an alternative video service in the previous year are much more likely than those who haven't used one - 14% vs. 4% - to cut the cord on TV in the next year."

However, customers who cut the cord on TV are not necessarily lost for TV providers, and increasing their satisfaction raises the likelihood that they will reactivate TV service or upgrade their Internet service in the future. Among customers who plan to drop TV service during the next 12 months, 44% say they expect to reactivate it during certain times of year. Overall satisfaction among customers in this group is 845, compared with 575 among those who do not plan to reactivate TV service and 561 among those who don't know if they will reactivate it.

The 2016 U.S. wireline studies are based on responses from 31,072 customers nationwide who evaluated their cable/satellite TV, high-speed Internet and telephone service providers. The studies were fielded in four waves: November 2015, February 2016, April 2016 and July 2016.

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