The idea that people will drop their cable or satellite television subscription in favor of services like Netflix (NASDAQ:NFLX), Hulu, and Amazon (NASDAQ:AMZN) Prime Instant Video has been a popular theory with little in the way of actual evidence.
The top pay-television companies, including Comcast (NASDAQ:CMCSA), Time Warner Cable (UNKNOWN:TWC.DL), and Charter Communications (NASDAQ:CHTR); satellite providers DirecTV (NYSE:DTV.DL) and DISH Network (NASDAQ:DISH); and telephone-company TV providers Verizon (NYSE:VZ) and AT&T (NYSE:T), lost only 125,777 subscribers in 2014, according to Leichtman Research Group. The numbers were worst for the traditional cable companies, which shed over 1.19 million customers, but those losses were mitigated by gains from the satellite and phone companies.
Cord cutting in favor of streaming services seems like the smart thing to do -- it allows consumers to ditch companies that have traditionally been quite unpopular due to poor customer service, while also eliminating an expensive bill.
But the trend that is appearing to take shape is different from what most would expect. Cord cutting may be rising in popularity, but new research from Nielsen suggests that cable may not have as much to worry about as the media suggests.
People are loyal to cable
The Nielsen data, as reported by Media Life magazine, shows that consumers are more likely to drop a streaming-video-on-demand service than they are to cut the cord with cable. Some of that, of course, is because it is a much bigger decision to turn off a wired or satellite television subscription than it is to drop a streaming service. You can cancel Netflix in a few clicks, while dropping Comcast or Time Warner Cable involves scheduling appointments and returning equipment (assuming the companies let you cancel without a fight).
Getting an SVOD service does not mean a home is about to cut cable, according to Nielsen, which reported that "93% of households that have cable, broadband, and SVOD are more likely to drop the other two services than cable."
"Cable may have a little more staying power than it's actually being given credit for recently," said Glenn Enoch, Nielsen senior vice president of Audience Insights, in a press briefing reported on by Variety and other news outlets.
It may fly in the face of what seems like a logical narrative, but it appears that in many cases, customers are using SVOD services as add-ons, not replacements for cable.
"Not every SVOD home is abandoning cable," Enoch said at the briefing. "Of all the things we looked at -- cable, broadband, SVOD -- the ones with cable subscriptions are much less likely to drop it over time."
Young people may not be cord cutters, either
While many media pundits and analysts believe that the millennial generation is growing up without an attachment to traditional cable, Enoch suggested that might not be the case. It could be that young people are "more likely to move from place to place than older folks, who tend to be more settled," Media Life reported him saying at the press event. "When these young people move, they cancel their cable subscriptions, but they often resubscribe when they get to their new location."
It is also possible that young people are forgoing cable subscriptions in favor of digital options, but that could change as they establish households. It is one thing for an individual to meet his or her TV needs through SVOD services, but that becomes more complicated (and pricier) when you add in partners and children.
In my home, my wife and I watch a number of network shows together, while she has a weakness for television movies when I am not around. I am currently watching the NHL playoffs after she goes to sleep. Our son watches Cartoon Network almost exclusively, and together, we may tune into Food Network or HGTV.
Meeting all those needs over SVOD would require more than one service -- probably at least three -- and even then there might be things one of us likes that we lose out on.
Cord cutting is more about the threat
It is not the reality of cord cutting but the possibility that has forced change in the cable industry. Products such as the DISH Sling TV, which offers a limited package of live TV via SVOD, and the recent announcement of Verizon launching skinny bundles of channels, are materializing, because consumers do have the option to leave cable behind.
At the moment, cord cutting may not be the existential threat to the cable industry it is often cited as, but it has led to more choices and innovation in the industry. Customers can leave cable entirely or stay and enjoy better choices, more options, and even improved pricing.
Daniel Kline owns shares of Apple. He has a Sling TV subscription provided by DISH. The Motley Fool recommends Amazon.com, Apple, Google (A shares), Google (C shares), Netflix, and Verizon Communications. The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.