The Remote Control Makes You Lazy and Channels Rich
You may have always suspected that TV viewers are an irrational bunch, but new research by Fabrizio Perretti (Department of Management and Technology) and Constança Esteves-Sorenson (Yale School of Management) demonstrates it – and the result can be generalized to consumers' behaviour at large.
In Micro-Costs: Inertia in Television Viewing (The Economic Journal, Volume 122, Issue 563, September 2012, Pages 867-902, doi: 10.1111/j.1468-0297.2012.02507.x) the scholars use the unique setting of Italian television to prove that no rational reason can explain the inertia displayed by TV viewers in sticking to the same channel long after the end of the show they are interested in.
The extant literature suggests high direct and indirect switching costs as the cause of inertia, but the explanation doesn't stand in the case of Italian television: the direct costs (pushing a button of the remote control) are negligible and the indirect ones (searching costs) are small for experienced viewers in an environment which used to have just six main channels attracting more than 90% of the audience in the days preceding the switch to the digital signal (the dataset refers to years 1990-2003).
The analysis shows that a 10% increase in the audience of a programme translates into a 2-4% increase in the audience of the following show, irrespective of the appeal of the programmes airing on other channels.
The authors can prove their thesis observing the gender composition of news programmes airing immediately after gender-targeted shows and comparing it to the composition when news follows gender-neutral shows. "During female shows, women outnumber men and this trend persists through the news. Conversely, during soccer games men outnumber women and this trend continues through the news", Perretti and Esteves-Sorensen write. "Male viewership, however, converges to female viewership over time", indicating that the inertial effect declines in time.
The effect is insensitive to the number of competing channels offering shows targeted to the same gender during the news and to the airing of brand new shows (factors that could increase the reward of switching channel and should cut inertia if the viewer behaved rationally).
The most likely cause for viewers' inertia turns out to be procrastination, according to the scholars. Switching channel using a remote control has such a paltry cost that the viewers think to be able to do it at any moment, and never – or only late – do. A mechanism consistent with other consumers' behaviours analysed by the literature, such as not making a phone call to enrol in a pension plan, or not cancelling a gym membership when no longer using the gym.
The paper also points to the fact that TV channels exploit viewers' inertia and gain money from it, because the advertisement revenues are directly proportional to shows' audiences. TV channels schedules are incredibly close to the optimal schedule considering viewers' inertia and the advertisement revenue due to viewers' irrational procrastination is estimated to be somewhere between 20% and 40% of TV channels' profits.