Youth is Not a Segment: It is the Whole Future Market

Changes in consumer demand, especially those that disrupt existing products and revenue streams, have been acute for the telecommunications business over the past couple of decades.

To note only a few of the key changes, people text instead of talk, use mobile instead of fixed telephones and use the Internet--both mobile, fixed and untethered. All of those changes, plus shifts in provider market shares, have created profound instability in what once was a very-stable industry.

“One of the most striking cultural and social changes in the U.S. in recent decades has been the revolution in the ways Americans communicate,” says Gallup.

Texting, using a mobile phone and email messages are the most frequently used forms of non-personal communication for adult Americans, according to a new Gallup poll of communications behavior.

Between 37 percent and 39 percent of all U.S. residents said they used each of these "a lot" on the day prior to being interviewed. Perhaps the most-significant finding, however, is that just nine percent of respondents use a home landline phone over the same time frame.

About 15 percent of respondents reported using a landline phone at work the prior day.

All of that leads some to speculate that within a few decades, nobody uses a landline phone anymore.

That might be too extreme a prediction. As service providers already have discovered, bundling voice as part of a triple-play offer props up buying of voice, increasingly the least-in-demand service within the fixed network bundle. But the long-term trend is clear enough, since mobile phones now are the preferred way most people use voice communications.

Telecom executives are relatively unperturbed about dwindling voice revenues in large part because other replacement revenues already have been identified, while the next generation of new services and apps already are within sight. It will be hard work. But the roadmap is in place.

As you would guess, communications behavior varies with age, with the widest divergences in behavior occurring between the youngest and oldest age cohorts.

Sending and receiving text messages is the most prevalent form of communication for 68 percent of surveyed U.S. residents 18 to 29.

About eight percent of U.S. residents 65 or older did so.

That same pattern holds for use of landline phones. About seven percent of respondents 18 to 29 reported using a home landline phone the past day, compared to 17 percent of those 65 or older.

More than 66 percent of those 18 to 29 say they sent and received text messages "a lot" the previous day, as did nearly half of Americans between 30 and 49.

Younger Americans are also well above average in their use of cellphones, email and social media on a daily basis. All that matters for one important reason.

The “youth market” is in some sense not a “segment” of the telecommunications market. At some point, younger consumers become the whole market. In the earlier days of the U.S. cable TV business, the same age-dependent adoption pattern could be seen.

At some point, the older consumers naturally left the market, and the younger age cohorts became today’s middle-aged and “65 or older” populations. In 2014, U.S. linear video subscriptions are purchased by more than 88 percent of U.S. households 68 or older.

Among households headed by consumers 18 to 35, linear video subscriptions are bought by about 62 percent of households.

But product demand changes over time. Though it remains unclear how purchasing behavior might change as the youngest cohort ages, buys homes and has children, many note that, at present, use of streaming services such as Netflix, though used by virtually all age groups, is highest amongst the households headed by the youngest consumers.

That might be the precursor to a demand shift changing prospects for linear video, just as changes in communications behavior by younger consumers portend a shift in demand for telecom services.

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