Media
Cable TV Losing to Online Video
A wave of cord-cutters and cord-frayers is changing the pay-TV landscape.
C BY DAVID A. PATTEN
able-led pay television executives are nervously eyeing a new trend aff ecting their bottom line — the rise of streaming video, which allows users to cut premium services from their
bill, and cut the fees associated with them. It’s already costing their industry billions. Unlike the cord-cutters who canceled their cable televi-
sion services in 2009 during the Great Recession, “cord- frayers” aren’t primarily motivated by tight budgets. They just want to take control of what they watch, and when. A recent national study by Market Strategies Inter-
national found that almost half of U.S. Internet users are streaming video content. Forty-six percent have can- celed one or more premium channels. A full 44 percent have downgraded to a less expensive cable TV package. And another 17 percent are using fewer pay- per-view services. Randall Hula, vice president of Mar-
ket Strategies, tells Newsmax the aver- age cord-frayer cuts the cable bill by $42 per month. “The downgrader is really someone
who has cut some sort of paid service,” Hula explains. “Cable companies think of it as losing revenue. You can look at a cord-frayer as someone who may keep Internet but cuts video. They may replace it with ancillary services, or they use their gaming system or Blu- ray system to stream Netfl ix, Amazon Prime, or Hulu Plus.”
44 NEWSMAX | MARCH 2013
Canceled Channel(s) 46%
Dropped Cable
9%
Dropped HD
7% Many cord-frayers stream TV programs on their smart-
phones or tablets, part of the growing trend toward mobile communications. Boston University communications professor Tobe
Berkovitz says the cord-fraying trend is popular among certain age groups. “It tends to be the tech-savvy, younger, hipper types who are leading a highly mobile life,” he tells Newsmax. “They might not have a great condo or a nice house, but they have lots of electronic gizmos — and they know how to use them.” From a programmer’s perspective, cord-fraying is some-
Changes Made to Pay TV Services 44%
Down- graded
Changed Providers
8%
Dropped Paid TV
6%
Cut Pay- Per-View
17%
Canceled DVR
7%
Returned a Receiver
2%
Percentage of Internet Users During May 2010-2012
SOURCE: Marketing Strategies International
thing of a nightmare. It makes amassing large audiences for advertisers more diffi cult. The cord-frayers’ determination to control their own programming could make Internet- based content even more important. “They’re simply people who have the ability to manipulate the fi eld of tech- nology,” Hula says. Now the question is whether cable
providers will follow the path of news- papers, which have been struggling just to survive. “It’s not going to happen overnight
that people are going to just jettison their cable,” Hula says. “There is too much sports and local content.” But he adds that people are already
fi nding ways to stream local cable pro- gramming and more could do so. “So then, what do you need cable
for?” he asks. “If you don’t want sports, that’s what it comes down to.”
COMPOSITE: TV, CABLE END, CABLE BOX, GLOBE, OCEAN, CUTTER/ISTOCKPHOTO
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