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Pay-TV Market Study Reveals Segmentation Upside

December 20, 2010 - 1 Comment

When you think of the  broadcast video entertainment arena, it seems to have been centered upon the notion that there’s a huge undifferentiated mass-market of consumers who — by and large — all want the same thing.

Incumbent pay-TV service offerings have tended to follow this belief, by delivering a small set of standardized service packages. And for the longest time there’s been no compelling need for traditional service providers to more closely scrutinize the market segmentation variables.

Now though, we’re clearly seeing a shift in the marketplace, that reflects an acknowledgement of the growing market fragmentation. In an on-demand, personalized world  some service providers are already voicing their intent to offer more flexibility in their pay-TV service options and associated pricing.

Granted, a small subset of U.S. pay-TV subscribers have, for a number of different reasons, decided not to wait for their incumbent service provider to introduce more granular or flexible service packages. These people are among the early-adopter cord-cutters that have been equally vocal about their preference for alternative value-based offerings.

We’ve been intrigued by these recent developments, and so we commissioned a market study to learn more about the potential for increased diversity of U.S. pay-TV customer needs and wants. The following are some highlights of what we were able to uncover.

As you’ll see, while some challenges remain, there’s significant opportunities for service providers to evolve the traditional pay-TV landscape — by adapting to the expanding demand for video entertainment offering differentiation and meaningful user experience innovation.

The key takeaways from the market study include:

  • 56% of survey respondents believe it’s important to be able to watch content on multiple devices (this figure increases to 72% for those under 25 and 67% of people aged 25-35)
  • 65% would be more likely to watch videos online if they could do it directly through their TV (especially those that live with friends – 77%)
  • 50% would pay for an online video service (increases to 57% of people aged 25-35) if available through their service provider — especially if it was offered at a low price point and easy to set-up
  • Some consumers are willing to pay between $10-16/month extra for a service provider TV package that includes watching online video content
  • 54% would like to be able to access general Internet content on their television
  • 58% would be less worried about their children’s social networking activities if it was carried out via TV so they could see what was happening

 Given what we’ve gleaned from this study thus far, we see the potential to cater to the differing needs of the younger demographic as an upside opportunity, and we share the optimistic outlook offered by Charter Communications CEO Mike Lovett. The market potential for hybrid service offerings (the combination of broadcast and online video) are very promising indeed. We’ll publish more details on this study, and further information on this topic, in the coming weeks.

For now, you’ve seen some of the results of this survey… how about you let us know your thoughts as well?   What excites you most about new and future video entertainment experiences?

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  1. Hello Doug,

    A very interesting study regarding the preferences of the Internet driven demographic age groups. This is clearly a statement that content will be moving to an Internet/TV based model.

    The caveat here is that until Pay TV Operators can see the benefits from a CAPEX and ROI model, the migration to offering flexibility in packages will be slow. Operators are tied to a content business model with programmers that clearly favors the mass market.

    But that will be changing as more and more demographic segments move toward and Internet model. Timing is the issue, and Cisco should be commended for undertaking the research that proves the direction and momentum of preferences.

    Market tests are the key to actually seeing a recognizable result, and should be encouraged from and operating standpoint.