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February 17, 2009

What Do Young People Want From Cable?

Demography may be destiny for key cable products.

There’s a message for cable operators in the ways that young adults watch TV and communicate:

• They are comfortable finding what they want to watch on Internet TV, whether user-generated video clips, full episodes of TV shows or recent movies.

• They see little value in using fixed phone lines when they have cell phones for talking and texting.

A survey by the Pew Research Center found that relatively few 18-29-year-olds rate cable and satellite TV, and TV sets, as necessities rather than as luxuries, as compared to older age groups, while the reverse applies to cell phones and high-speed Internet access.

Percentages of Age Groups Rating Products as Necessities

Age Groups->

18-29

30-49

50-64

65+

Cable or Satellite TV

24%

28%

37%

50%

TV set

53%

61%

71%

73%

Cell phone

57%

53%

44%

38%

High speed Internet

34%

32%

30%

14%

Source: Social and Demographic Trends, Pew Research Center, survey Oct-Nov08, http://pewsocialtrends.org

Another Pew study showed much greater online video watching and social networking by the younger age groups.

Percentages of Age Groups Engaged in Online Activities

Age Groups->

18-32

33-44

45-54

55-63

64-72

73+

Watch Videos Online

72%

57%

49%

30%

24%

14%

Use Social Networking Sites

67%

36%

20%

9%

11%

4%

Source: Sydney Jones, Generations Online in 2009, Pew Internet Project Data Memo, 28 January 2009

A study by the National Center for Health Statistics reported that younger households are much more likely to have only wireless telephone service. This study also revealed substantially increased percentages of wireless-only households across all age groups since 2005.

Percentages of Age Groups in Wireless-Only Households

Age Groups->

18-24

25-29

30-44

45-64

65+

Wireless-only households – 1H2008

31%

36%

19%

9%

3%

Wireless- only households – 1H2005

17%

17%

7%

3%

1%

Blumberg SL, Luke JV. Wireless Substitution: Early release of estimates from the National Health Interview Survey, January-June 2008. National Center for Health Statistics. http://www/cdc.gov/nchc/nhis.htm. 17Dec08

As many already know or will soon find out, youth is fleeting. Which leads to the question: Are young adults different just because they are young and, if so, will they set aside childish things as they get older? For example, if a young adult has relied solely on mobile wireless, will she want a landline phone when she’s 30? If someone has grown accustomed to the selectivity of online video, will he pay for a package of 500 basic and premium TV channels when he gets older, especially if online TV can by then be streamed conveniently to big screen TVs?

The most likely outcome is that today’s young adults will carry their online and mobile wireless preferences with them as they get older because of habit, and because online TV and mobile wireless are continuously adding more compelling features, functionality and convenience.

As a result, how landline phones and linear TV programming are offered may need to change. For example, a residential fixed phone line may morph into a “free” feature bundled with broadband access or (in the case of telcos) with mobile wireless. Concerning linear TV, cable operators and other stakeholders may find it worthwhile to reconsider the merits of a la carte, this time purely for business reasons, regardless of regulatory or congressional pressures. Next-generation interactive EPGs may allow subscribers to share reviews of TV shows and movies, one of multiple forms of operator-supported social networking.

Demographic trends play out gradually so MSO business models don’t need to be revised right away in order to respond. On the other hand, long-term changes in the Internet age can creep up quickly. Both the public World Wide Web and digital mobile wireless were introduced as recently as the early-mid-1990s, approximately 15 years ago, when very few of today’s young adults (or their parents) had any plans to go online or to use cell phones.

The ways of younger consumers provide valuable clues for cable strategists and marketers. Those who attend to such clues are better equipped to stay clear of a post-online twilight zone of newspaper classifieds, audio CDs, local travel agents and 30-volume encyclopedias.

Peter D. Shapiro is founder and principal at PDS Consulting (www.pdsconsulting.net), which specializes in cable and telecommunications assignments. His clients include operators, financiers, attorneys, industry associations, and government agencies. He provides opportunity assessments, due diligence analyses, competition monitoring and evaluation, and industry expert litigation support. He can be reached at Peter@PDSConsulting.net.







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