Last month our Telco Transformation poll addressed a rather controversial issue in the pay-TV industry: should operators focus on younger, millennial customers or on older, more traditional customers?
In recent years the phenomenon of cord-cutting has generated headlines, as pay-TV providers struggle to adapt their business to the needs of younger audiences. These millennial customers want flexible contracts, on-demand services, access via any device of their choice and they want all of this for considerably less than previous generations have paid.
Pay-TV providers have created new skinny bundles, expanded their on-demand libraries and launched new multiscreen services to cater to this demand, as cord-cutting starts to eat into their subscriber base. However, the needs and preferences of their larger subscriber base have been getting far less press.
Are operators better off making significant investments to address the needs of younger demographics, or are they better served catering to their existing base of more traditional users, who have a far higher willingness to pay, with an average spend per household two to three times that of a skinny bundle? Aren't those subscribers far more important, because they subscribe to full-fat services, which generate far more revenue and greater margins for the operator?
Should pay-TV operators focus on older customers or millennials?
Source: Telco Transformation Flash Poll, May 2017
In our poll, we asked respondents "Should pay-TV operators focus on older customers or millennials?"
Responses were mixed, but the single most selected response was "Mostly younger customers; that's where the future is."
About two in five respondents (39%) selected that option, well ahead of "Mostly older customers; but keep an eye on younger demographics too," which came in next, with 30% selecting it. This was followed by "Let the market decide; just have a broad selection of offers even if the business case is weak" which was chosen by 26% of respondents.
Reading a little between the lines while interpreting the data, it does appear that respondents were looking for a sort of "middle-ground" option, with the more extreme options (focus only on the young, or focus only on the older, traditional subscribers) not getting much of a response.
This is underscored by some of the comments from the respondents:
"I think they just need to focus on all consumers. Everyone pays them money, so why would you turn it down? Or not make things usable for them?"
"Hulu, Netfix and Amazon don't focus on a specific audience. They have content for all ages and demographics which is how companies should operate. When companies focus on one age group they are limiting their revenue potential."
"They didn't really have an option for my choice but I say no one company should focus on one age group. Large companies that have been in business for years have customers than span age ranges."
"Maybe don't focus on age brackets at all? I think the best strategy is to focus on making products that appeal to everyone. The iPad is simply a great design that anyone can use, so I doubt Apple tried to make it appeal to young kids OR older adults -- they just made a product that was easy to use."
Essentially, respondents don't see pay-TV as a targeted service, but rather something that should have broad appeal. They accept that there might be features or bundles that are designed for one or the other segment, but generally speaking they expect a pay-TV service to have broad appeal and value.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation