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Growth in "Zero-TV" Homes is Zero Surprise

March 19, 2013 by Will Richmond

Nielsen's new Q4 '12 Cross-Platform Report has identified just over 5 million "zero-TV" homes in the U.S., as Nielsen calls them, an increase from 2 million in 2007. Not to be confused, these aren't homes without TVs (75% of them still have at least one); rather they are homes that don't receive programming over traditional platforms (i.e. pay-TV and broadcast). Instead, almost half of them (48%) opt for OTT services like Netflix, Hulu Plus and others for content.

The growth in "zero-TV" homes should come as zero surprise. In fact, if there's anything surprising, it's that the number isn't already higher. But who these zero-TV homes are is less clear: are they cord-cutters or cord-nevers? The fact that almost half of them are under 35 suggests many are cord-nevers. Yet, the 2 main reasons for not subscribing to pay-TV (36% due to cost and 31% due to lack of interest) suggests many cord-cutters. Either way, with only 18% of them considering subscribing to pay-TV, most may well be "permanently cordless" and beyond the industry's promotional efforts.

Much has changed in the video landscape over the last 5 years, contributing to the rise of zero-TV homes. Pay-TV's basic digital service now costs more than $70-$80 per month, making it a target for domestic cost-cutting, particularly given the recession's impact. In addition, the quality and range of programming available online since 2007 has vastly improved, enabling zero-TV homes to watch much of what they would have watched on TV, albeit a bit later. Lastly, in the past 5 years a variety of non-TV online activities (e.g. games, Facebook, Twitter, etc.) and explosion in mobile devices (e.g. smartphones, tablets) has caused all kinds of competition for consumers' time.

To get a sense of where the zero-TV trend is going in the future, consider the following 3 things that are practically guaranteed to happen: (1) pay-TV rates will continue to rise, as operators struggle to keep pace with skyrocketing programming costs, driven in particular by big-time sports; (2) the quality of OTT video will surely improve as Netflix, Amazon and other vie for the online distribution rights to popular TV programs and movies, the online-only originals space continues to blossom and new low-cost services like Aereo spring up and (3) social media and gaming continue to surge alongside the omnipresence of mobile devices.

All of that suggests to me that while zero-TV homes today are just 5% of total, they're heading up, though by how much is yet unclear. True, cord-cutting and cord-nevering have been talked about for several years now, with little material evidence of their effect. But while the pay-TV industry wrings its hands over bundling practices and struggles to roll out TV Everywhere, consumers have more video choices to act on than ever.

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