Communication Trends

Highlights from the 2009

Nielsen Convergence Audit
 Introduction
VOD, DVR, VoIP, FiOS—you may need a dictionary to decipher the acronyms of some of the
latest technology advances that have re-defined the media and telecommunications landscape
in the U.S. Understanding the media and communications habits of today’s consumers more
deeply than the competition offers companies the best way to win in this hyper-competitive,
fragmented environment.
To understand consumers’ attitudes and behavior towards voice, video and data products, Nielsen
conducts one of the largest surveys of its kind—the Nielsen Convergence Audit. The Convergence
Audit® is an annual survey that collects more than 32,000 U.S. online and mail respondents.
The most notable trends in 2009 include a rise in households who have “cut the cord” by trading
their traditional landlines for wireless cellular services and an increase in mobile media device usage
among a diverse set of households.

Cutting the telephone cord
While an overwhelming majority, 88%,
of U.S. households have a wireless phone
in 2009, most still maintain a traditional
landline at home. However, this is changing.
In the second quarter of 2009, over one in
five households reported they are wireless
cellular only—an increase of 16% from
the past year. This increase comes from
the two-thirds of households who have
dropped their landlines as well as from
young adults that started new households
with just a wireless phone service.
Wireless Cellular Only Penetration
21%
18%
15% 15%
Blackberry versus iPhone Interestingly, in terms of psychographic
differences, the iPhone household has a
Nielsen reveals that approximately 15% slight edge over the Blackberry household
of U.S. households own a smart phone. in being the first to seek out the newest
In spite of the recent sales success of technology. Blackberry households
the iPhone®, the earlier introduction tend to wait until a new technology is
of the Blackberry® gives them a higher proven before investing. However, both
penetration rate of 8% versus 4% for the Blackberry and iPhone audiences tend to
iPhone. Given the high price point of both be technology savvy, early adopters of
devices, the demographic profile of the technology and wireless oriented.
Blackberry and iPhone user looks very
similar—both appeal to households with
higher income and education levels.
Psychographic Differences (iPhone vs. Blackberry)
76%
I prefer to wait until a new technology has
been proven in the market before buying it
79%

36%
I want the latest
technology regardless of price 26%

2006 2007 2008 2009 54%

I always seem to be the first to try
out a new technology 41%

I'm much more interested in the 70%

latest technology than most people
62%

I like technology that reflects my 80%

personal style 77%

0% 20% 40% 60% 80% 100%

Blackberry households iPhone households

Households with Blackberry phones = 1,238 and households with iPhone phones = 2,543.

Copyright © 2009 The Nielsen Company. 09/747

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Primary reasons for prepaid phones Mobile media expansion For many of the mobile media devices,
more technologically savvy people drive
Most wireless cellular phone users have This year all media player products in growth. However, consumers who are
a post-paid contract, but 15% of house- the market have seen growth. Given an less technology oriented have embraced
holds use prepaid phones. This attractive increase in availability, product op- gaming devices and use DVR’s heavily.
“pay-as-you-go” option offers simplicity tions and cost reductions, these types Further analysis of the Convergence
and minimal commitment which are of products have become more main- Audit data usage among two Nielsen
noted as the primary reasons for choosing stream. With one-third of households ConneXions lifestage groups—Young &
this type of service plan. owning gaming devices (xBox® 360, Wireless and Frugal Folks—demonstrates
Playstation® or Wii®) and digital video this trend.
recorders (DVR), they are becoming well
Primary Reasons for Prepaid Wireless established products that continue to The ConneXions® household segmenta-
Cellular Phone Service exhibit healthy year-over-year growth tion system groups consumers into 53
rates. Growth of portable MP3 music segments based on voice, video and
Simple plan/
simple to use 14%
players without video capabilities data consumption, as well as consumer
­leveled off in 2009 at 25%. Adoption of technology adoption, or Technodoption.
No monthly
bill 13%
other alternative media player products The 53 ConneXions segments fit within
is still in the early stages, although 10 lifestage groups based on the combi-
Emergency
use only 13%
all have exhibited growth this year. nation of technology adoption, age and
Most notable are devices that offer family structure.
No lengthy
contract 10%
video ­capabilities.
Budget
control 9%

For use by
7%
Media Player Products Currently in Household
child/teenager

xBox 360, 33%

30%
Credit issues 5% Playstation or Wii 13%
N/A
32%
Received DVR or TiVo 27%
as a gift 5% 28%
19%

Portable MP3 Music 25%

Prefer to
3% 24%
pay cash Player Without 25%
Video Capabilities 17%
20%
Cellphone with 15%
Total sample size = 4,256. MP3 Music Player 12%
5%

Sony PSP or 18%

17%
Nintendo DS 14%
Portable Game Player 14% 2009
Cell Phone with 18%
12% 2008
Streaming Video 13%
Capabilities 8%
2007
Portable MP3 Player 15%
12%
(Such as iPod) 10% 2006
with Video Capabilities 4%

Total sample size = 32,735.

Copyright © 2009 The Nielsen Company. 09/747

2
The Young & Wireless group consists
mostly of young, upscale singles
and couples who set trends and love
ConneXions Index: Young & Wireless and Frugal Folks
technology. These households adore
wireless devices and connect to the 250

Internet by cell phone, laptop and

handheld devices like iPhones and 200
Blackberries. Many gave up their landline
telephones—if they ever had them—for
cell phones with MP3 and video players. 150

They subscribe to a DVR, but use it less

Index
heavily as they spend most of their leisure
100
time online downloading music, watching
Blackberry iPhone Cord cutters Cell phone Cell phone Portable game Video game DVR heavy
streaming video and instant-messaging with MP3 with streaming player (e.g. console users
friends as well as checking out information music player video capability Sony PSP or (e.g. Xbox 360, 4+hours
Nintedo DS) Playstation 3, 50
about jobs, cars and apartments. Serious or Wii)

music fans, they rarely travel without their Young & Wireless Frugal Folks
MP3 players or car radios blaring. When it 0

comes to cool technology, they own it.

With their more lower-middle-class
incomes from blue-collar and service
industry jobs Frugal Folks boast more
moderate technology tendencies. Ethnically
diverse and widely scattered throughout
the exurban landscape, these Americans
spend what they can on technology to
keep their children entertained at home,
indulging them with video game consoles
and portable game players as well as
educational computer software. These
video-focused households watch their Fiber Optic TV Subscribers by Income
DVR for more than four hours a day as
well as watching on-demand TV. They rent 46%
movies at a video store and use their kids’ <$50K
24%
game systems to watch video content.
Modest incomes depress technology usage
18%
and lead these households on a constant $50K-$74.9K
search for cheaper alternatives for phones 19%
and the Internet.
14%
$75K-$99.9K
19%

Fiber optic TV growth

11%
Fiber optic TVs continued to grow over the $100K-$149.9K
23%
past year with penetration increasing from
3% to 5%. Fiber optic TV homes tend to
3%
have higher incomes, with almost one $150K+
in three subscriber households earning 8%
$100,000 or more, compared with just
14% of all other TV households. Those
HHs Not Subscribing to Fiber TV HHs Subscribing to Fiber TV
switching to this relatively new service
tend to be early adopters of technology.
Households not subscribing to Fiber TV = 30,859 and households subscribing to Fiber TV = 1,373.

Copyright © 2009 The Nielsen Company. 09/747

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The evolving landscape
The cut-throat telecommunications
landscape continues to evolve, with
consumers simultaneously deepening
their commitment to wireless services and
responding to higher-value bundles from
their wireline cable or telecom provider.
The growth of Verizon’s FiOS and AT&T’s
U-verse services underscores the parallel
growth of these technologies.
Consumers subscribing to wireless cellular
services expect not only telephone com-
munication, but also value-added features
from simple enhancements like an MP3
player, to Internet-accessible smart
phones. Despite their higher costs smart
phones will continue to gain market share.
The benefits of mobile email and the
Internet coupled with improvements in
Internet display capabilities and network
speed will continue to drive this trend.
Similarly, cord-cutting households will
continue to grow in numbers as consum-
ers find wireless cellular service ­meeting
their needs, further pressuring the
telecommunications landline business.
Prepaid cell phones will also gain, as
some consumers seek the simplicity they
offer and others look for more mini-
mal financial commitments during the
economic downturn. As a result of these
trends, traditional wireline telephony has
ceased to offer high-profits reliably for
telecommunication companies.
For more information call (800) 234-5973 or
visit www.nielsen.com.
Conclusion About The Nielsen Company
Advanced services will continue to The Nielsen Company is a global informa-
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sumers will purchase devices that connect, sumer information, television and other
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well as when they are away from home. mobile measurement, trade shows and
business publications (Billboard, The
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nuances—and particularly the differences
between—of the people who will become
their new customers and those who com-
prise their existing customer base. Those
companies who can quickly differentiate
their customers will prosper.
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Copyright © 2009 The Nielsen Company. 09/747