conflicting models
continue to steal market share. Ovum believes that cable customers will defect to more innovative and better value IPTV and satellite pay-TV options, the continuation of a decline that begun as cable households fell by four million between 2007 and 2010. Jonathan Doran, Ovum analyst and author of the report, said: “DTT growth will be fuelled primarily by the further allocation of spectrum for free-to-air services and the implementation of analogue switchover deadlines, while telcos will continue to aggressively market their IPTV offerings as they play catch-up with the longer-established cable and satellite pay-TV platforms.” By contrast, satellite’s pay-TV offerings are expected to shrug off competition from the lower-cost rivals as it continues to attract a core of higher-value subscribers than cable. Ovum expects satellite TV to experience 10% annual growth over the next five years to reach 419 million households worldwide.
OTT
These assorted temptations, however, are nothing compared to the threats from what are best described as informal over the top services. While YouTube and GoogleTV (and Apple TV) might appeal to some, the world has yet to really experience the sort of programming coming from Sony, LG, Toshiba, Samsung and Panasonic. These electronics giants seem to be saying that it is better to enjoy a modest $5 a month ‘subscription’ for the life of a TV set than a squeezed margin and one-time only profit on the sale of the TV set.
The combined effect of services like YouTube, iTunes and their like, suggests that traditional subscriptions to cable and satellite pay-TV services are under threat from so-called ‘cord
cutters’, people who are abandoning traditional sources of linear entertainment in favour of non-linear downloading.
Video cord-cutting is a spectre in the sense that no one seems quite sure if it’s real or not, but a new Harris Interactive Poll went ghost-hunting and found some compelling evidence in the USA, where one in five Americans - 22% - cancelled or reduced their cable TV subscriptions in the six months to mid-2010. And another 21% considered giving their cable companies the axe. It seems the percentages are pretty consistent. The percentage of US consumers who say they've cut back or eliminated cable was 22% in February 2010 and 21% in October 2009. It is widely admitted that tech-savvy Gen Xers (aged 34 to 45) are more likely to snip the cord than other cohorts.
28% have done so since February 2010. A full 23% of baby boomers did, while the hyper-connected 18-33- year-olds actually lagged at 22% shutting off the service - a finding backed up by Nielsen’s ongoing ratings research. Unsurprisingly, only 13% of the 65-plus group dropped their cable supply. Thank goodness for inertia! There certainly seems to be a trend: the second quarter of 2010 saw the first ever loss of customers for the pay TV industry as a whole. And according to the most recent round of earnings reports, cable cos in the US lost about 500,000 subscribers in the third quarter of 2010. And the numbers are meaningful: in basic cable subs alone Comcast lost 275,000, Time Warner lost 155,000, Charter Communications lost 63,800 and Cablevision lost 24,500 subscribers.
Those losses don’t match up to equalising gains by satellite or IPTV providers like AT&T and Verizon, which saw some subscriber additions, but not
content distribution
Neil Gaydon, Pace plc:
“Do consumers really want all this extra choice?
They’ve already got 1000 channels, and yet typically only watch a handful. Who is inventing all this alleged demand? I know and understand that much of the hype is coming from the very community that usually steals its content anyway, and that’s not a business model.”
500,000 of them. That suggests that consumers are simply, well, cutting the cord altogether.
Google TV, which has found itself to be painted as a cord-cutting OTT monster by the big four US broadcast networks of late, would beg to differ. “Our point of view is that cord-cutting is not happening,” said Google TV product lead Rishi Chandra, speaking at a conference at the end of 2010. “We think the cable industry does a pretty good job of delivering content to users, so we don’t think that all of a sudden users are going to shut off all that content.”
And even if it is happening, the likes of Google TV are not the impetus for subscribers shutting down their cable boxes, Chandra noted. Another well- regarded number cruncher,Sanford C. Bernstein & Co. analyst Craig Moffett, told The New York Times that cord- cutters “…tend to be in the bottom half of the economy,” and “someone who’s 40 years old and poor.” In other words, it’s an economic issue, rather than attributable to OTT suppliers eating pay-TV’s lunch. Meanwhile, Nielsen finds that online video viewing continues to increase but only modestly, with the number of viewers per month rising 6% from year on year.
Research firm Strategy Analytics
www.ibeweb.com l march/april 2011 l ibe l 9
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