Over the last couple of years I’ve written about cord-cutting and today I have another update of sorts. As you know, this refers to people disconnecting from a “traditional” video provider such as a cable or satellite service and using only content delivered to the via “over-the-top” services – things that sit on top of a broadband connection. These are services such as Netflix, Hulu, Amazon Video, and others.
Here is what caught my eye:
Thirteen of largest multichannel video providers in the U.S. — about 94% of the market (94.6 million subscribers) — lost about 345,000 net additional video subscribers in 2Q 2013 — down 0.4%, according to the Durham, N.H.-based Leichtman Research Group…The top nine cable companies lost about 555,000 video subscribers in second-quarter 2013, compared to a loss of about 540,000 subscribers in the second quarter of 2012…Bruce Leichtman, president and principal analyst for Leichtman Research Group, stated: “The multichannel video industry has leveled off, with major providers losing about 0.1% of all subscribers over the past year.”
OK, so not exactly a massive disconnect. On the other hand, the trend is accelerating by most accounts, especially among younger people. Now let’s think about the ongoing battle between Time Warner Cable and CBS. No matter which side you’re on, it gives people the opportunity to seek alternatives, at least with respect to CBS and Showtime programming. Once they figure out that much of the content is available elsewhere, cutting the cord becomes more viable.
Another anecdote. This past weekend, I wanted to watch the Solheim Cup golf matches. The place in which we were staying didn’t get the network carrying the matches and the live streaming via YouTube was not available in the US. Solution? I watched on a proxy server in Europe. Not some sort of illegal torrent – simply a proxy server so they thought I was in France. For those of us who are a bit more technically minded (and I think anyone under 30 fits the bill), this is a form of cord cutting behavior and negates the need for anything more that a high-speed connection to watch what I want on my own schedule.
Finally, some more research from STRATA shows that none of this is going unnoticed by the marketing community:
Focus on television advertising has hit a three-year low as the gap between TV and digital narrowed to its closest point ever, according to the most recent quarterly survey compiled by STRATA…TV advertising still remains the top advertising medium with 44% of survey respondents saying they are more interested in advertising on TV (spot TV/cable) than any other medium. While TV is still number one, this represents the lowest level of broadcast advertising interest seen in the STRATA quarterly survey in nearly three years. Gaining steadily on TV, digital is the second most popular medium at 35%…28% feel they will have a greater spend in Digital than Traditional in 1-3 years. 27% say they don’t ever anticipate a greater spend in Digital (down 45% and the lowest percentage ever).
Ad spending is a big part of the fuel that drives these businesses (and the Time Warner/CBS dispute points out the relatively new other piece – transmission fees). If that piece shrinks, along with viewers and subscribers, the industry is in big trouble. As the Chinese say, “interesting times”.