Is Video Substitution About to Begin?

John Wallis, Hyatt global head of marketing and brand strategy, isn't so sure huge databases built over the years are so valuable anymore, in the wake of a global recession that seems to be changing behavior drastically and might have lasting effects.

 

That could happen in the multi-channel television business as well, if recent ChangeWave survey findings are correct.

 

A recent ChangeWave survey of 1,660 Baby Boomers between the ages of 45 and 63, completed in early May, focused on TV viewing habits vs. home Internet usage.

 

The results point to what ChangeWave calls a "powerful shift" away from traditional TV towards new types of online services and entertainment. Importantly, this transformation is affecting lifelong habits. That's the sort of thing one has to be watching for in today's environment: new behavior patterns.

 

According to ChangeWave, Boomers now spend more free time online (12.9 hrs per week on average) than they do watching traditional TV (11.8 hrs per week on average). An important note, though. Some have hypothesized there is a shift in viewing of video-away from linear and towards Web sources. That is what the ChangeWave survey finds.

 

By a five-to-one margin, Boomers are watching less traditional television than they did a year ago. Among this group, 62 percent say it’s because they’re not as interested in what's on TV these days, and another 26 percent say they’re spending more time surfing the Web.

 

Among traditional TV viewers, 20 percent say they’re likely to downgrade or cancel their current TV service package in the next six months. The likelihood of canceling is highest among cable (22 percent) and satellite subscribers (22 percent), and lowest among fiber-optic TV subscribers (seven percent).

 

When asked which of their current subscriptions is most vulnerable to abandonment, TV Service was the pick of 44 percent of respondents.

 

In comparison, 23 percent said they would consider abandoning their wired telephone service, while 11 percent would consider dropping their movie rental service.

 

Just five percent said they'd consider dropping Internet service. About four percent suggested they would consider giving up their newspapers, while only three percent said they would consider giving up their mobile phone service.

 

More than 69 percent of respondents say they’ve watched video content on their computer over the past 90 days. Even more ominously, 48 percent of respondents say they’d be willing to pay a monthly fee for a video-over-the-Internet subscription if it provided the same programming currently available on their TV service.

 

So far, measurable change of this sort with actual revenue implications has not been seen. But things might change.

     

Wallis, for example, says he is not looking at any data from existing databases, instead focusing strictly on customers it has had activity from only since September 2008. That's a big change for a company that historically has relied quite a lot on database mining.

 

There likely are lessons here for communications service providers as well. Old data might suddenly be less valuable than in the past because consumers might have shifted behavior, whether temporarily or not being a big question.

 

A possible warning sign: response rates that have been relatively consistent and predictable suddenly become non-linear, or in volumes that differ from past ranges, either higher or lower.

 

So far, the clearest sign of a shift is seen in prepaid mobile service, which has experienced a shift in demand curve lately. Results in other service segments have largely been inconclusive so far, with the sole exception of a slowdown in new orders almost across the board.

 

The other exception to that rule seems to be smart phone accounts, which seem to be growing. But we ought to be especially alert to other changes that haven't been seen tangibly so far.

 

Video entertainment behavior, which so far has stubbornly shown almost no evidence of measurable change, at least in terms of financial evidence provided by service provider revenues, might face permanent difficulties if consumers act in ways consistent with what they now seem to telling at least some pollsters.