Digital Trends recently ran a piece on cord-cutting with a splashy photo of scissors slicing through a cable cord. The sub-headline read with our emphasis: "With alternatives like Netflix, Hulu Plus and Amazon's Prime Instant wooing customers away from cable, the subscriber base at most cable companies is dwindling."
While it is true that Comcast reported a loss of 165,000 cable customers on an earnings call, the state of Pay-TV is hardly dwindling. Even with the six figure customer loss, Comcast had around 23 million video subscribers at the end of last quarter. DirectTV had almost 20 million customers at that time. All told, industry analysts estimate that around 100 million people subscribe to multichannel Pay-TV operators in the United States. That is not exactly a shaky subscriber base.
But the broadcasters and cable companies engage in their own brand of streaming media hyperbole, claiming that almost no one in this country is cutting the cord. Take this recent headline, for example:
"Pay TV resilient to threat from Hulu, Netflix"
Indusry analyst Stefan Anninger does a good job of reigning in the jarring cord-cutting language in a recent report. He says that even though pay TV is losing customers, "we do not expect the pay TV universe subscribers ‘to fall off a cliff’ over the next year or two.” On the other hand, Anninger notes that “pay TV executives' argument that there is little evidence of cord-cutting is ‘an oversimplification.’
Many cable executives insist that these trends are the result of a lagging economy, and when things pick up, cord cutting won’t be an issue. Online video proponents say that we are in the middle of a fundamental shift in the way people access video, and things will never go back to the way they were. To understand what is actually happening in the American media landscape, we need to get beyond the rhetoric of cord cutters and cord defenders and take a level-headed view of the industry as a whole.
Anyone looking at these numbers can see a clear cord cutting trend. Our Q3 Video Index report found explosive growth in connected TV devices and game consoles last quarter. And the number of people cutting the cord is growing: SNL Kagan estimates that over-the-top substitution, which includes cord cutters as well as people who never signed up for pay TV, will grow from 2.5 million households to 4.5 million households by the end of 2011. At the same time, 100 million cable and satellite subscribers aren’t likely to disappear overnight.
Online video still has some growing up to do, especially on the content licensing and rights side of the equation. But online video will undeniably play a major role in the future of media. As streaming services increase market penetration, even more people will expect to have broadcast-quality content on their iPads, Android phones, Rokus and Xboxes. By enabling personalized content, targeted, useful advertising and cross-device viewing options, online video delivers a lot of value to viewers. How this value will be distributed throughout the TV ecosystem—among programmers, service providers and advertisers—remains to be seen. But like with most technology sea changes, there will be a tipping point of rapid adoption and consolidation.
Online video is quickly approaching that point. Players that don’t get out ahead of the curve to offer an engaging, multi-screen viewing experience risk getting left behind. Let’s cut the hype, focus on the numbers and chart a smart plan for the future.
Leave a Comment