Scott Meyer of Innovative Systems shares insights from the 2020 Video and Internet Study, discussing DVR usage, streaming only households and an alarming decrease in customer satisfaction among rural telcos.
Transcripts have been lightly edited for clarity and readability.
Andy Johns: What are some of the emerging trends in internet and video? That’s what we’ll be talking about on this episode of StoryConnect: The Podcast. I’m your host, Andy Johns, once again with WordSouth. And I’m joined in this episode once again by Scott Meyer, who is director of marketing with Innovative Systems. Scott, thanks for joining me, again.
Scott Meyer: Happy to be here.
Andy Johns: I think after two or three visits on the podcast here, you get to be a friend of the podcast, not just a guest. So we appreciate that. If you had seen, if any listeners out there had seen our top 10 list for most listened to podcasts of 2019, one of the episodes that we recorded with Scott was number 10, and what wasn’t on the list is the other one we recorded with Scott was number 11. So strong, strong listener-ship for the two topics that we recorded on earlier last year. So thanks for that.
Scott Meyer: You’re welcome.
Andy Johns: On this episode, we’re going to talk about Innovative Systems’s 2020 Video and Internet Study that they had commissioned Cronin to do. And there are several different topics to get into, so this’ll be a little different than the the channel talk that we did before. But Scott has quite a few interesting finds from that study. So if just the top line takeaway for you — this is the fifth year, I believe you’ve done this study — what’s the main headline or what stood out and grabbed you, as either most surprising or the biggest deal from this study?
Scott Meyer: Well, there was a couple of things, Andy. I think we fully expected the number of people that have streaming only homes in the video world to go up. They’ve been going up incrementally over the last four years. This is year five of the study, but this year they did go up significantly to about 25% of streaming only homes, which, you know, still 70% plus rely on traditional video, which fits the rural demographics. But then the other thing that really kind of stood out for me — we did have some new things, and I know we’ll probably talk about that later — but one of the things that stood out with me was the satisfaction for broadband, as far as their customer satisfaction, dropped dramatically over the last few years. And I think we can maybe connect the dots on a few things there, but what was very surprised how much that dropped and as far as how happy they were with their internet.
Andy Johns: Yeah. That’s not a good sign. Let’s talk, because I think part of what’s always interesting to me with the studies that you do is, it’s not everybody. It’s not the big cities. It focuses on rural. So before we get too into it, let’s talk a little bit about the methodology, how you put the information together.
Scott Meyer: Sure. So you know Cronin, Tim Owens and his team, put together a randomly surveyed group of around 400 residential customers. And these residential customers all reside in markets that are served by independent communications companies. That’s part of the directive we have given to them. We want them to talk to the people that us as Innovative Systems vendor serve primarily, and that is the rural market. It’s a phone interview, so it’s not an online interview. But when I go through the report, it also includes demographics on who has responded. And we have a very, very accurate demographic skew here that we’re getting through. And I’m scrolling here, so you’ll have to bear with me.
Andy Johns: Sure. I think you had said that some of these numbers really just came out last week for you. Is that right?
Scott Meyer: Right. But I’m looking at this, and, you know, like 35% of the people that were surveyed were over the age of 65, but then another, probably 60% were between the ages of 26 and 55. So we really did get down into a wider demographic study this time. And I think we’ve skewed a little bit more on the older end, but we had a discussion about that after we wrapped up. And I kind of directed Tim let’s try to get a little bit wider base, because we really do want this to be a fair representation of what rural America is all about. And so I think that’s maybe partly reflecting some of the changes that we’ve had with our results this year.
Andy Johns: Okay. But the membership of NTCA — and I should say that we’re here recording live at the NTCA RTIME conference in Phoenix, Arizona — but the people involved in this study are a lot of the NTCA member end customer. I mean, this is the right audience for that for sure. And I think that’s important to note on this. So there are a couple of things you mentioned that we can go ahead and dive into. So let’s talk about the streaming only households. Did that number surprise you? I mean, as many headlines as are about people cutting the cord, I know we have talked before on mic and off mic, that there’s still a very strong linear audience out there. What did that number tell you this year?
Scott Meyer: Well, you know, the thing of it is that when we started — and this is year five — streaming only was like at 1% five years ago. Then subsequently it’s went up 1%, 4%, 6%, 7%. But then this year, it went to 25%, which, you know, that’s still not something that when you think about basically the lion’s share of the people that are consuming video are still consuming it through a traditional linear play. But it does follow with what we believe, and we believed for quite some time, that even though those numbers are going to be a lot different in urban America, just for demographic reasons and other reasons that doesn’t necessarily apply to the rural marketplace. So it was a surprise to see it go up to 25%, but also to some degree, not surprising. And when you look at it as a whole, it’s still over 70% are still watching linear video.
Andy Johns: Right. And anytime you talk about streaming versus linear video, live sports is always something that’s talked about. And some of the information you had said in this study was kind of revealing about habits that folks have when it comes to watching live sports.
Scott Meyer: Yeah. And we decided that this year we were going to include that as a first time question, percentage of total television viewing of sporting events. And one of the reasons that we did is live streaming is hard from a technical standpoint. And there’s a lot of, you know, you’re moving stuff over an internet connection, and so all of the people that are in the know, know that live streaming definitely — and especially on large TVs, which that’s where people want to watch their sporting events — can be a bit more of a challenge. But what we’ve seen with this first-time question is that about 45% of rural America does spend time consuming live sporting events. So pretty significant number. And then as we drilled that down a little bit further, out of those who watch live sports, 53% of them watch football. That’s their sport of choice, followed by basketball, baseball, and then there’s sorted other events as well. But so really when you think about it, football really does kind of drive that sporting viewage.
Andy Johns: And those numbers are for, when you’re talking about 45% spend time watching sports, that’s for linear or streaming or any format?
Scott Meyer: Well, the way we frame the question — that’s a good question — we just said, “what is the percentage of total time you spend viewing sporting events?” And we did not grain that out.
Andy Johns: Platform neutral. Okay.
Scott Meyer: Right. Right. But really at the end of the day, you know, it’s safe to say that half of the rural homes in America watch live sporting events. And so that does mean that if they’re going to watch live sports in a streaming environment, that they need to get the fastest internet from their broadband provider to get a good experience. And if they’re in challenged areas, we know a lot of our customers are — I’m talking about our customers, service providers — just either haven’t gotten fiber out there or due to terrain issues, can’t get fiber to those homes. They’re not going to have the kind of speeds that’s going to give them a good experience streaming live sports.
Andy Johns: Right. Because when the buffering starts right at that crucial play, that’s no fun.
Scott Meyer: No one bad news, man.
Andy Johns: Okay. So that’s interesting. But let’s move on to what sounded like maybe potentially bad news with the customer satisfaction decrease. And I guess maybe I shouldn’t put judgment on it; maybe there’s some other factors, like you said. But let’s get into that and talk about it. So it sounds like this year in particular, there was a decrease in the overall satisfaction that folks have with their internet providers.
Scott Meyer: Yes. Yes. That was probably the one of the things that stood out to me the most. So in 2019, well, we went from when we first started five years ago, the completely satisfied internet customer was at about 63%. They were like very, very satisfied. Well that number has stayed pretty stable. And then in 2019 last year, that number basically went up from the mid-sixties to 71%. While what really threw me off was we’re down now to only 48% fully satisfied customers with their internet. So, I mean, that’s a big, big drop. I think we can kind of draw some conclusions there. I think a couple of the conclusions that we can draw from this, and it does match some of our other data, that the customers are consuming more video over the internet, which is going to affect their experience, if they don’t have the speed that they need. And then the second thing is the in home networks, by and large, aren’t controlled by the service provider. So a lot of those people are using very low quality home wifi routers. And so that is going to create dissatisfaction. And the problem is it’s a consumer perception, Andy, because when a consumer goes and buys a cheap router from Walmart, and the internet that comes to their home is a good quality, they’re not going to blame that cheap router. They’re going to blame the service provider. So I think the combination of the increased amount of people that are streaming video, coupled with the lower inferior routers in the home are really causing a dissatisfaction. And I might want to also add to that that the percentage of people that have managed WiFi is still very low. And we truly believe that our customers as service providers…and, you know, the average home in rural America has over six devices connected to the internet. So that coupled with the dissatisfaction should help people to recognize that there’s only about 13% of rural Americans that have a managed WiFi service in their home today. That’s a very low percentage. 87% do not have managed WiFi.
Andy Johns: It reminds me of one of the sessions that I had done. I’ve done this millennial panel at a couple of different conferences. And one of the millennials who was up there said that you know, how satisfied are you with your internet provider? “Not very.” And then later on we ask, “where did you get your router?” And she proudly said that she had got the router for $9.99 at Marshall’s. And this is nothing against Marshall’s, but it’s not the place I would go to buy a router and particularly in the bargain bin. And so then all of a sudden, a lot of hands went up from the audience, which telco folks going, “would you ever consider that it’s the routers fault, not your inner provider’s fault.” And it’s like a light bulb went on for her. So we’re educating one at a time if we have to. But like you said, a lot of folks are just going to associate that with their internet service, not necessarily with the device they bought.
Scott Meyer: Right. And that really does bring the responsibility back to the service provider to really strive to be better educators and help them to understand this. And you know, revenue is a driver, and they can drive that revenue by offering a managed wifi service and seeing how we are only seeing 13% in rural America that have it. There’s a huge market share that they could gain off of that. And I just think that there’s some missing pieces, and it’s going to become more of a problem. And I think that’s why our satisfaction went way down.
Andy Johns: Yeah. That’s such a staggering number. So 71% were completely satisfied in the 2019 study, and that number dropped to 43% in 2020. That’s, that’s alarming.
Scott Meyer: It is. It is. And so really an answer to your question, what stood out to me as the most significant thing? I think that probably was out of the entire study this year was that huge drop in satisfaction with the provider.
Andy Johns: Were there any kind of sub questions or anything beyond that to give you any other insight? As if there may be anything to give an explanation. I think the router idea, that definitely has legs to it. That it’s the in-home network experience. But were there any other data points in the study that might point at why that is such a significant drop?
Scott Meyer: Good question, because we did ask a follow-up question. What was your reasons for low rating? , so 58% that gave it that low rating cited poor, unreliable service. And again, back to our earlier discussion. I mean, we know a lot of our customers have spent millions and millions of dollars bringing state of the art fiber to the customer’s home. But once it gets to that home, once it gets inside that home, if they can’t manage that for the customer, then that experience could be greatly degraded. And I think that poor, unreliable service, you know, that was the number one reason that they gave such ratings. So I suspect there’s a connection there.
Andy Johns: Well that’s good. That’s some good insight that that provides on what that number might be. Because I think that one is going to surprise a lot of people. One of the other interesting things, while we’re talking about customer service in the way that folks are interacting with their their customers, was about the trial periods. The folks, you know, jumping up to try the the higher speeds. I know that’s something that we have worked with clients on before the speed bump, you know, give folks, let them try the higher speeds. The story that I always go back to on that — it’ll take a while to get there — but the Lincoln highway was going from the East coast to the West coast across the whole country. And it was a lot of like the Rockefeller, Carnegie, big money type folks in America that had started funding it. But there wasn’t enough money to go around, because the individual States, cities and counties didn’t want to pay their part of making this new paved road. There’s going to be the first paid road from coast to coast. So what they did when they did the highway was, instead of trying to, you know, pave the first few hundred miles that they could, they would go between cities, and they would pave with nice new asphalt, just two miles or three miles between cities to get people to experience what a nice new road that wasn’t rotted out and dusty and all that. And once the people tried out that new asphalt, then they started demanding it that they have it everywhere. And I told you it would take a while to get there, but we did, so it comes back to broadband then. I really feel like, and it sounds like your data may suggest that too, that when you give folks a chance to see what life could be like with a faster connection, that they’re pretty receptive to it.
Scott Meyer: And you know, I mean the number may not seem like a lot, but a 16% of those surveyed said they are very interested. I mean to the point where they would want a trial to see the fastest internet. And it may not seem like a lot, but what is more important than that — and we actually have real case studies all over rural America — the companies that have done these speed bump trials, they always get people to keep it. So really from a cost and return on investment, for them to give somebody their highest internet for a month to get a percentage of those, let’s say they get 10% that keep it, well, that could be the equivalent of, you know, tens of thousands of dollars a month in recurring revenue. And once they get that higher speed, they’re not going to go back. So we really think there’s a really a golden opportunity for service providers who have not yet taken a step to offer customers a trial of their best internet. And like to your analogy with the highway, it just makes sense. They’re not going to see what that experience is until they’ve actually had a chance to be on it like the highway, in this case, being on faster internet.
Andy Johns: I appreciate you following me down that down that analogy.
Scott Meyer: Well, it’s a good one.
Andy Johns: The last thing I had on my list for us to talk about was you said there were some information about DVRs that had showed up on there. And kind of surprising numbers to me. Just, you know, based on hearing so many folks over and over again with the cord cutting was this thing that was a huge deal. But there’s some encouraging numbers, I would say, from the DVR front.
Scott Meyer: So in our DVR study, which we have actually been doing for five years, we’ve never ever been above 55% DVR penetration. This year, It jumped all the way up to 64%. And for us, it’s real easy to draw the conclusion there. Many, many service writers, including our customers that we provide a DVR service, we provide it through the cloud, our network DVR. So everything resides at the company’s secure location. And so it’s much easier for the company to deploy this, because they don’t have to roll a truck out there. They just basically, from their office, turn it on. They’re doing creative promotional things, giving people trials of DVR. And we really believe that that has created an upward take in the DVR service. And you know, again, time shifted viewing has always been something that has become very, very important to a customer, especially over the last five years between DVR, restart TV, VOD, those types of things.
And you know, sadly if our companies would have been involved in more time shifted viewing earlier, I think that would have had a bigger impact on cord cutting. Because time shifted viewing does relate to cord cutting in the respect of, with a streaming service, you can watch stuff whenever you want to watch it. Well, the legacy linear providers have been able to offer this for years, and it just never really got deployed. And one of the things that we see — and this is a little bit off topic — but one of the most used features in our data reports that we get from our customers is the number of actions when they use the restart TV feature. So if you hit your remote control to do a restart, we actually have data that will show, you know, and it’s one of the most used features in a customer’s linear video product is restart TV. So that just tells us that time shifted viewing is very important and does keep them on the traditional product or even in streaming. Like it’s a streaming world has restart now as well, but that does give more control to the customer. And I think DVRs part of that as well.
Andy Johns: So to hit those numbers again, DVR use had never topped 55, percent?
Scott Meyer: Right.
Andy Johns: But this 2020 video and internet study, it had topped…
Scott Meyer: 64% percent have DVRs. I think it’s, you know, anytime you get 10% jumps, that’s quite a bit. So really that one did stand out to me also for 2020.
Andy Johns: Definitely. Well those are some good stats to throw out there. It’s a good discussion. I’ve learned a few things. It’s very insightful as usual. Was there anything else that stood out or anything else that you want to add before we wrap up here? That’s a lot of good insight, but was there anything else you wanted to add?
Scott Meyer: No, I don’t think so. I think technology is changing. I think rural America is adapting to technology, but as we’ve been saying for the last few years, the rate of adaptation is going to be much, much slower than it is in urban America. And it’s primarily a demographic driven thing. But, you know, we’ve always felt that as a service provider, you really need to do your best to offer the customer products that best fit their lifestyle, and don’t force your technology on them. Give them what they want. If they want, you know, faster internet, if they want streaming video, if they want traditional video, don’t force them out, unless you have to.
Andy Johns: Got it. If somebody has listened to this while they are driving or whatever, and they want to see the numbers in front of them and dig in deeper to this, what’s the best way for them to get that information and dig a little deeper?
Scott Meyer: Yes. Well, we actually do make this report available to any service providers for free. So they can either reach out to you, send you an email on your contact to the podcast, or they can email directly to me, firstname.lastname@example.org, and he probably will put that up on the screen. It doesn’t matter, but we’re happy to provide them with the data. We have a lot of skin in the game here in rural America and, we want people to see that information.
Andy Johns: Great. And we’ll put your email address in the show notes, like you said, so that they can click there. Well, Scott has been another good episode. I appreciate the insights. As always. Thanks for joining me.
Scott Meyer: Thanks for letting me sit on your couch.
Andy Johns: Yeah, he is Scott Meyer. He is the director of marketing with Innovative systems is going over the 2020 video and internet, a study commissioned by Cronin. I’m your host, Andy Johns. We’ve got a few more episodes to record here at the epicenter of the rural broadband university this week at our time in Phoenix. And until we talk again, keep telling your story.