New data from Roku reveal that those cutting their traditional pay-tv subscriptions today still value live TV. They are using vMVPDs to help them save money. However, the savings will erode, but perhaps not as fast as their reliance on live TV.
Roku’s The New Generation of Cord-Cutters report paints a compelling picture of the state of premium video entertainment in the U.S. today. The data is undoubtedly favorable to Roku’s market position, finding evidence of accelerating cord-cutting and large groups of digital-only TV viewers.
New generation cord-cutters
However, the Roku data uncovers an interesting shift in the habits of people cutting the cord from traditional cable, satellite, and telco TV today. These so-called “new generation” cord-cutters (ngCCs) still value and watch live TV, whereas older cord-cutters are more predisposed to favor on-demand viewing.
Unsurprisingly, the ngCC’s preferred method of viewing live TV is through a vMVPD. They are 52% more likely to have a service like YouTube TV, Sling TV, and Hulu Live than the general population of cord-cutters. They are also watching more than the average cord-cutter. 28% more ngCCs watch five or more hours on the weekend and 19% more on weekdays.
There were no significant differences between ngCCs and the broader group of cord-cutters in the consumption of major content genres like local and national news, TV comedies, and dramas. However, ngCCs were 34% more likely to watch reality TV, 28% more likely to watch national sports, 37% for regional sports, and 48% for DIY.
Saving money on live TV driving move from traditional pay-tv
The Roku data is a strong indication that the shift to online viewing has entered a new phase. Those people that were not committed to live TV have already left the pay-tv ecosystem. The people leaving cable, satellite, and telco TV today are cost-conscious consumers that still value live TV. Before the vMVPDs, they were trapped in high-priced pay-tv services. Today, providers such as Sling TV offer them the chance again to follow the Kardashians or watch Monday Night Football on ESPN starting from as low as $25 a month.
What’s more, Roku suggests that more people are entering the value consumer segment. The company says a typical trajectory for cord-cutting is for a TV viewer to reduce (or “shave”) their traditional pay TV package first, and then cut later. Roku says there are 30 million cord shavers, about the same as last year. However, 3 to 3.5 million of them became cord-cutters in the previous year. In other words, 3 to 3.5 pay-tv subscribers became shavers in the last year.
Nearly half of cord-shavers are looking for a cheaper option, and 37% say they plan to leave traditional pay TV altogether.
vMVPDs a temporary fix for value-driven consumers
The same mechanisms driving the cost of conventional pay-tv ever higher impact vMVPDs even more. The increase in cost of licensing TV channels has outpaced inflation for a decade or more. What’s more, cable operators have absorbed some of that increase to keep costs down for consumers. They can afford to do this because TV service helps keep customers subscribed to higher-margin broadband services.
vMVPDs are paying higher license fees than their traditional pay-tv peers. They also lack other services to justify absorbing TV channel license fee increases. In other words, they will pass along the full license fee increase to customers. Over time, vMVPD subscriber fees will grow far faster than cable TV costs.
In other words, the consumers that are leaving traditional pay-tv to save money will see the price difference erode quickly over the next several years.
However, perhaps the grip of live TV on ngCCs is loosening. Moffettnathan says live TV viewership is declining 5% per year and being replaced by on-demand viewing. It could be, as we at nScreenMedia has opined often, that vMVPDs are a temporary phenomenon aiding the broader shift away from live TV.
Why it matters
Roku says that people leaving traditional pay-tv today still value live TV and are just looking for a cheaper option.
They fill the desire for live TV with vMVPD services.
However, vMPVD subscription fees are liable to rise faster than cable TV, eroding the savings.
 Roku surveyed 7000 people from the general population of TV households.
 Strictly speaking, someone leaving traditional pay-tv for vMVPDs is not cutting the cord, they are cord shifting.