It seems we are hearing more about the death of television every day. No, pundits and press aren’t coming out and espousing “TV is dead,”
but more and more is being written about
“cord cutters”—those pesky consumers who
are opting out of traditional television subscriptions in favor of getting all the content
they want elsewhere.
In fact, whenever we see a dip in television
ratings (like we have recently in NFL viewership), the pot is stirred again, the fervor is
whipped up, and the murmuring reaches a
crescendo: “That’s it, television is dead. Stick a
fork in it.” Because there can be only one reason for a drop in ratings or a reduction in subscribers: Clearly, it’s people cutting the cord.
But let’s take a step back and look at cord
cutting a bit more objectively.
First, is it happening a lot? Probably not as
much as people think, despite the headlines.
According to a variety of different statistics,
about 12% of consumers have cut the cord in
2016 (with a growth rate of 1%–2% predicted until the year 2019). Of course, about 20% of consumers have never subscribed (mainly Millennials). But that still leaves way more than
the majority subscribing to a pay television service. Yes, pay TV subscriptions are down. Yes,
consumers are increasingly getting their content directly from content providers (like HBO
NOW) or from aggregate services (like Sling
TV). But the number of cable or satellite subscriptions is still high.
And how do we account for consumers who
may subscribe to pay TV providers to get content in an alternate way (e.g., TV Everywhere),
for whom the television service itself is just a
throwaway part of the relationship?
Second, is it happening globally? The answer
to that is a little more complicated. In order to
understand cord cutting, you have to look at
the economics of it. According to analyst firm
IHS Markit’s Ben Keen, the U.S. has the largest
gap between consumers subscribing to broad-
band and an OTT service (he uses Netflix in his
analysis) and a “triple play” offering from a pay
TV operator—a gap of about $35. That means
that U.S. consumers have $35 to use on other
OTT services (in addition to their broadband
and Netflix subscriptions) to fill out what they
might be missing in a pay television subscrip-
tion. Sling TV? CBS All Access? HBO NOW?
All of the above.
In other countries, though, there is little to
no gap between broadband plus Netflix and a
multiple system operator’s (MSO) triple play,
which means that it doesn’t make economic
sense for consumers in many other countries to
cut the cord. (Keen specifically refers to France,
Germany, Spain, and the U.K.) This is especially
true as some of the largest providers across Europe, like Liberty Global, ink deals to integrate
Netflix and other OTT providers into their television platforms, giving consumers even less
reason to sever their relationship.
Cord cutting is less of a reality than we’d all
like to think. It’s just a way to describe what’s
really happening—a transition from traditional broadcast to IP delivery. Whether that IP is
over a fixed line or the internet doesn’t really
matter because, let’s face it, there will always
be a cord of some kind. It might be to a pay TV
provider. It might be to a content distributor
or owner. Regardless, consumers are going to
subscribe somewhere to get the content that
they want (yes, there will always be a small
portion who get the majority of their content
over the air), and that means they’ll be connected via some kind of cord.
What we really need is a different way to
measure the progress of this transition—a better way to represent how consumers are migrating from the television experience of the
last 5 decades to one of the future.
The Reality of
Cord Cutting Isn’t So Real
Jason Thibeault is the executive director of the Streaming Video
Alliance. Follow him on Twitter @_jasonthibeault.
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