How many different television channels do you watch?
The average person says it's somewhere between five and 10, according to a recent survey from DigitalSmiths. In fact, almost 40% of respondents said they watch five or fewer channels. Almost 80% said they watch 10 or fewer. However, Nielsen's data show that the average consumer tunes into 17.5 channels.
Respondents to the DigitalSmiths survey also severely underestimate the amount of time they spend watching TV on a daily basis. The average respondent says he or she watches between two and four hours of TV per day. Nielsen says the average is five hours and 24 minutes.
Let's look at what this discrepancy means for pay-TV companies such as Comcast and Verizon (NYSE:VZ).
Complain loudly, but do nothing
While the threat of cord cutting is relatively large, the number of people who follow through is rather small. The DigitalSmiths survey found that 7.9% of customers plan to cut the cord entirely or switch to online streaming and rental services within the next six months. (Why it distinguishes between the two is beyond me.) However, in the past 12 months, only about 1.5% of survey respondents have cut ties with their pay-TV operator.
A notable 24.2% of customers report being unsatisfied with their service. The biggest complaint is that service fees are too high. About one-third of unsatisfied customers are unhappy with the channel selection available to them, which makes no sense considering they also say they only watch a handful of channels. (More likely they're unhappy with the bundle they'd need to buy to get the channels they want.)
Still, with nearly one-fourth of customers unhappy with their service, only 18.2% took action in the past 12 months to do anything about it. As mentioned, very few actually cut the cord. Most simply dropped expensive premium channels and sports packages or otherwise reduced the level of the pay-TV service they received. Those numbers were offset by the 18.4% of customers who added service.
The relative inaction among pay-TV subscribers shows the discrepancy between people's perceived value of their cable subscription and the actual value they receive. People say they can live without cable, but when it comes to taking action, something keeps them from leaving entirely. That means cable companies don't have to work too hard to improve their customer service, despite the terrible complaints they receive, nor do they need to offer more selection or service.
Implications for an a la carte model
There's a growing contingent of consumers lobbying for a la carte television. In fact, Verizon began offering a pick-and-pay package earlier this year to appease subscribers looking to customize their cable bundle.
The perceived level of engagement with television could have an impact on the pay-TV business if a la carte cable is ever mandated or cable companies are otherwise compelled to switch to that model. If consumers believe they watch only a handful of channels, they're only going to subscribe to those channels, regardless of whether they would actually watch closer to 20 channels on the cable bundle. It also means they'll probably watch less live and recorded television, since they'll have fewer options.
The DigitalSmiths survey asked consumers about a la carte options, and the average respondent said he or she would subscribe to 17 channels for a maximum of $38 per month. The number of channels is surprisingly in line with Nielsen's numbers, but the cost is completely unreasonable. Even Verizon's offer started at $55 per month, and it's not exactly a la carte TV -- although it included much more than 17 channels.
Consumers will have to choose between cost and the channels they want to watch. Historically, consumers have been willing to pay for the channels they want. However, it's not clear if they will continue to pay for certain channels when they have to actively choose to include them in their pay-TV packages.
There's a lot of risk involved with a switch to a la carte TV. However, if it becomes clear that's the way the market is heading, cable companies will be better off putting together their own a la carte offers than getting disrupted by new competitors.
Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Verizon Communications. 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.