Skinny Bundles on the Rise: The Data You Need to Know About American Cord-Cutters

(The following originally appeared on the Affinio blog) OTT is the true future of TVHow people access content and television is being transformed. It has never been easier for American consumers to watch TV shows, news, sports and movies without a subscription to cable television. For years, the premium cable TV channels like HGTV, ESPN and The Disney Channel were owned exclusively by cable giants, and consumers were charged a hefty subscription bill for access. Those days are over.Today, companies like Sling TV are disrupting the traditional cable/satellite industry by delighting consumers with over-the-top (OTT) cable channels. Known as “skinny bundles,” these packages give consumers the power to pick what channels they actually want, pay less for them and watch their favorite shows in real-time -- over the internet, on any device. It’s no wonder that more and more American consumers are choosing to cut the cord.Cord-cutting pressures are mountingCord-cutting pressures are mounting and expected to hit a high by the end of 2017. According to The Wall Street Journal, traditional pay-television subscriptions fell by the largest percentage (approximately 2.4%) in the first quarter of 2017, and all the major cable players are feeling the effects. Cable giants are now scrambling to offer up their own skinny bundles by acquiring other networks in an attempt to win back some of their revenue losses and subscribers.We saw this in July 2017, where Discovery Communications acquired Scripps Networks Interactive, home of channels like HGTV, Cooking Channel and the Food Network, for a price tag of $14.6 billion. Yes, billion.Cable companies face cannibalization threatsTo survive, cable companies need to suffer short term losses and offer up skinny bundles to consumers. Cable companies have an increasingly shrinking addressable market, and unless they move towards OTT-models, they will slowly become obsolete. The statistics are not favorable either; the median age of Americans watching CNN, MSNBC, and Fox News is over 60, and stats show that the younger millennial – “cord-nevers” – have never had a cable subscription or need one.Skinny bundles and OTT are the future, and while the impact of the price reduction is hurting cable companies now and cannibalizing their cable subscriptions, there are many future opportunities and benefits for both the advertiser and the cable company.

“If you're a traditional advertiser, and you spend the majority of your budget on TV, you face the real problem of those TV audiences shrinking. Especially in younger demos. You need to know how to reach that next generation viewer. They're going to OTT.” – Scott Rosenberg, SVP, and GM of Advertising at Roku

OTT presents new opportunities for marketing and mediaMeasuring TV viewership and understanding its audience has always been a challenge for marketers. Typically, TV data is collected through lengthy, traditional market research methods such as polling, surveying, and in-home measurement boxes. While methods like the “Nielsen Family” can access viewing habits, they only take into account a small sample size and are unable to determine who in the household is watching, beyond simple demographic insights like age, household income, etc.OTT, however, presents a new opportunity to understand who is watching, what they are watching, and when. Data that was previously difficult to unlock and determine with cable television.As shared by Roku's Rosenberg:

“One of the things about OTT is that every ad impression can be measured, like all of digital media. All of the digital things that are possible in mobile and desktop, now we can do that with TV as well.”

As OTT audiences grow, their size will be comparable to the once dominant cable/broadcast audience. With viewing and consumer data in hand, advertisers and cable companies will have the insights needed to personalize the entire experience for the consumer -- from what content they get recommended, to what advertisements they see. Stronger, targeted advertisements and content means higher ad sales and direct revenue for the key OTT players.The skinny on cord-cutters: data on the next-gen viewerBefore advertisers and cable companies alike can reap the benefits of OTT, they need to understand how to reach the next generation viewer. Using Affinio – the marketing intelligence platform – we were able to generate a data-driven persona of the American “cord-cutter,” those individuals who are subscribing to services such as Sling TV, Hulu Live TV and more. By understanding who these individuals are, OTT services can be tailored and personalized.MethodologyAffinio’s algorithm lets users look at audience connections, evaluate them and reason about them in aggregate. Through the use of machine learning and social media analysis, Affinio analyzed the connections between the accounts of selected skinny bundles and OTT platforms*, the content read and shared by audience members, and the interests of the audience to develop multi-dimensional audience personas.*We analyzed the audiences of Sling TV, Hulu Live TV, DirectTV Now, YouTube TV and Roku. By analyzing these social accounts, we are assuming that the audience does not have cable television or is switching to these providers. Note: Netflix was not included in this analysis due to the fact many cable users also subscribe to Netflix, and it is not necessarily replacing cable television.The audience visualization below reveals how the individuals following the selected skinny bundles and OTT platforms segmented into 16 interest-based communities, based on their shared interests and affinities. Each cluster of colored nodes represents each interest-based community. The more nodes, the bigger the community. The lines between the nodes represent follower relationships. The more lines, the more people in the community are likely to know each other or are connected.Initial observationsImmediately, we can make some initial observations about the cord-cutting audience. In the above audience visualization, we see a diverse break out of many segments that are attracted to OTT, cord-cutting services. The largest interest-based segments are Celebrity Gossip Moms, Entertainment Fans and Comedy Fans. This isn’t surprising as many of the skinny bundles offered today are entertainment-driven.The two sports-driven segments, Sports Dads and Soccer Fan, are of particular interest since live sports has long been a way to keep people on cable television and has been excluded from many skinny bundle packages. However, the sports segment proves to be a growing community within the OTT and skinny bundle landscape, and is a budding opportunity for OTT players.In August 2017, CBS announced it would be launching “a 24/7 live-streaming sports channel later this year, as the broadcast company works to better compete with digital rivals and a loss in subscriptions stemmed from cord cutters." Similarly, in August 2017, Disney also announced its plan to launch a dedicated over-the-top ESPN service in 2018.What about the smaller niche communities such as Gamers and Music Snobs found within the audience? These communities may present an interesting growth opportunity and new bundle offering for the OTT industry. Niche OTT providers like Kevin Hart’s LOL Network and ComicConHQ have already launched to capitalize on niche audiences.Diving deeper into the dataWhat else can we learn about the American cord-cutter? Affinio analyzes the profiles of every audience cluster and plots their locations using a heat map. Darker/highly saturated areas indicate zones where a lot of audience members live. The heat map reveals that the largest portion of the audience is located in coastal cities such as New York, Los Angeles, and San Francisco.Looking at the demographic age breakdown of the cord-cutting audience, we can see that less than 5% is over the age of 55. The majority of the cord-cutters fall into the range of 25-44, which accounts for over 74% of the audience.In terms of gender breakdown, the audience is fairly evenly split.Going even further, Affinio hones in on what matters most to the cord-cutting audiences – from brands, celebrities, to sports teams. Affinio can even identify what TV channels and shows matter most to the overall audience, or on a segment level.Top TV channels for overall cord-cutting audience(some of the biggest: HBO, ABC News, NBC News, ESPN, CBS)Top TV shows for overall cord-cutting audience(some of the biggest: The Mindy Project, the Daily Show, The Tonight Show, Saturday Night Live and Entertainment Tonight)With technologies like Affinio, understanding the American cord-cutter and both their demographic and psychographic traits has never been easier. The platform’s advanced audience insights can be used as a roadmap to inform everything from subscriber acquisition strategies to content acquisition strategies.Affinio provides forward-looking data for the OTT industryAs the use of OTT services grows, it is likely that only a few key players will stay on top and secure a large, protected audience share. The key to conquering the OTT landscape and securing long-term subscribers will be to understand the cord-cutting audience intimately and the content they want to receive. From the channels that mean most to consumers, to the shows they love to watch, to the advertisements that will resonate with them, all of which can be informed by defensible audience data. That’s a subscription we’d buy into.