Despite the ease with which TV viewers can change channels, their choice of programme is heavily influenced by whether they watched the previous programme on the same channel. TV stations take advantage of this inertia by putting programmes in sequences that optimise their overall viewership – and hence their profits.
These are among the findings of research by Professors Constança Esteves-Sorenson and Fabrizio Perretti, which analyses TV viewing habits in Italy, a country with only six channels and where virtually everyone uses remote controls. The study, published in the September 2012 issue of the Economic Journal, suggests that people will stick with their default option even when they face the tiniest costs of switching – in this case, simply pressing a button.
The results have implications way beyond TV programming. For example, in cases where choices have important consequences – such as the selection of healthcare plans or retirement accounts – policy-makers should strongly consider either requiring people to make an active choice of an initial option or setting a default that is generally going to be the best choice.
Why don’t people cancel gym memberships that they don’t use? Why do they take a long time to enrol in generous retirement plans? Economists have noticed that in a wide variety of settings, people persist in making choices that seem far from perfect.
The most common belief among economists has been that this behavioural inertia stems from the costs of switching: for example, people would rather continue to pay monthly memberships than deal with the hassle of cancelling them.
But this study demonstrates that another factor can also account for this persistence: procrastination. The empirical analysis focuses on people watching TV in Italy.
The setting has a number of useful features: viewers are very experienced with the decision of which programme to watch, remote controls are widespread and the number of channels is limited to six. This means that viewers faced extremely low costs both in terms of changing the channel and in terms of searching for programmes.
Despite these low costs, the choice of programme depends substantially on whether the viewer happened to have watched the previous programme on the same channel. For example, when the news on a particular channel follows a football match, more men will watch it. But when the same news programme follows a programme appealing to women – such as an episode of a romantic series – more women watch the news.
Similarly, more people watch the news on evenings when it follows a popular movie. On average, the researchers find that the audience for a TV programme increases by 2-4% for each 10% increase in the audience of the preceding programme.
Examining several potential factors that might account for this effect, the study finds that a form of procrastination on the part of consumers is most consistent with the observed patterns. In essence, viewers appear to underestimate, in the short term, the value of switching.
If this is true, even miniscule switching costs can induce inertia. Viewers essentially tell themselves: ‘I will switch in a minute’. But when that minute passes, they again discount the gains to switching and decide that they should wait yet another minute – and so on.
These findings help to explain why viewers persist with whatever channel they happen to be watching, despite the fact that switching appears only to require the press of a thumb on a remote control.
Previous research on US viewers ascribed viewer inertia primarily to advertising of the next programme during the preceding programme, hence persuading viewers to remain on the channel. But this form of advertising cannot explain inertia in Italy, as the TV stations there rarely use it.
But the Italian TV stations do appear to take full advantage of consumer procrastination, intentionally sequencing programmes so as to optimise their overall viewership. The analysis in this study suggests that if they did not do so, their profits would decline by 20-40%.
‘Micro-costs: Inertia in Television Viewing‘ by Constança Esteves-Sorenson and Fabrizio Perretti is published in the September 2012 issue of the Economic Journal.
The Economist The irrationality of couch potatoes
The Washington Post The economics of channel surfing
The Financial Times We’re all couch potatoes now (£)
The Undercover Economist We’re all couch potatoes now (also published in the FT: see above)