Video Disruption
By: Tim Young
Consider, if you will, the way that the rate of cord-cutting has been covered over the last few years.
Headline from 2009: “More American TV viewers are ditching cable to watch shows online.” It’s a neat little window into the world of seven short years ago, with popular shows including 30 Rock and Mad Men name-dropped. In those days, as iPads and Rokus and the like were still in their respective infancies, the main reason cited that people were opting to stick to cable instead of switching to streaming services was because no one wanted to watch low-quality TV on a PC. They’d rather be on their comfortable couches watching high-definition programming… an option totally available to today’s cord-cutters. So what percentage of TV viewers had cut the cord in that not-so-distant past? The article guessed it was about 1%.
Fast-forward to a release from Nielsen in March, 2016. “Despite a rapidly evolving media landscape where consumers have more choices than ever in the way they consume video entertainment,” the release reads, “traditional TV still reigns as the preferred platform globally.” Pithy headline? “Keep Calm and Watch Video.” The numbers cited? Just over one quarter of global respondents report that they pay an over-the-top provider such as Hulu or Netflix to watch programming, while 72% pay to watch via a traditional TV connection. Drill down to continents and you see that percentage that pays for OTT services rise to 35% in North America and 32% in Asia Pacific.
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The big takeaways from those two stories, to me, is that (a) the market is changing and user preferences are changing, and (b) we’re not as worried about it, collectively, as we used to be.
And that’s fair, because lots of cablecos and other pay TV providers are still doing just fine. Comcast reported that it did lose 36,000 video subscribers last year, but it simultaneously added 89,000 new video customers. Video revenue for the company rose by 3.6%, hitting $21.5 billion in 2015. Brian L. Roberts, Chairman and Chief Executive Officer of Comcast Corporation, called those the “best video customer results in nine years.”
But results vary, depending on the provider. According to the Wall Street Journal, research firm MoffettNathanson reports that Americans pay TV providers lost 605,000 subscribers in Q2 2015 alone, and 357,000 in Q3 2015. Dish Network took the biggest hit in both quarters, while Verizon’s FiOS saw gains in both quarters.
So despite the fact that cord-cutting is undeniably a real thing, and that a portion of subscribers would rather go a-la-carte with OTT offerings than take what pay TV providers are offering, we’re not yet seeing the scorched-earth scenario that some envisioned a few short years ago. We’re instead seeing a mixed bag, with different providers experiencing different levels of pain (or, in some cases, pleasure).
What we are also seeing, however, is a gradual change in what subscribers are looking for.
Americans, for example, have access to more channels of TV programming than ever before. Nielsen said that the average American now has access to some 200 channels, up from 129 back in 2008. But while from 2008 to 2013, Americans were fairly steady in the number of channels they watched—about 17—they are now watching fewer channels on average. In 2014, that number slid to 16.8, and it dropped to 15.9 in 2015. So perhaps the big chunk of programming offerings isn’t resonating as well with subscribers as it used to.
