Parsing The Media Prognosticators
Some interesting assessments could be found at the VideoSchmooze Online Video Forum, which offered a lively deconstructions of media shibboleths. Nothing was sacred. And because it was scheduled in December, it provided a last word, of sorts, for 2013.
Industry analysts Craig Moffet and Bruce Leichtmen’s session, “A Deep Dive into Video’s Tectonic Shifts,” aimed to separate the truth from the hyperbole. See a short video here.
Is cord-cutting an issue? According to Moffet, cord cutting de-accelerated in the third quarter of 2013. That means it is going down, unlike what was reported in the mainstream technology press at the time. The fact that it was misreported as accelerating indicated to Moffet that “it speaks to a desire in the tech press for parables – overthrowing the oppressive MVPDs. But the math tells you otherwise.” Yes, “there is no question that people are cutting the cord ,but it is not a torrent. It is a trickle.”
What does seem to be losing ground is pay TV, because cord-cutting, or lowering your media bill , is economically driven. Moffet noted that the past twelve months were the worst performing months in pay TV history. Why? “Economic reasons and alternatives at the low end of the spectrum” said Leichtman. Young people actually crave full subscription cable and are deferring their subscriptions until they can afford it. Moffet, citing a sample of one – his 27-year-old daughter – reaffirmed this theory. “If you have cable it means that you are rich, and it is cool to be rich” he says his daughter said.
Somewhat surprisingly, Netflix was cited as a company that has a “dirty little secret,” according to Leichtman. “Netflix churn was 70%. Now it is 50%. It is low-price and high-churn, which gives it a low barrier to entry and a low barrier to exit. Netflix is up to 32 million subscribers but its target is 60-90 million.” Obviously this has not negatively affected the company’s stock price , but it is still surprising to hear. However, Netflix can hurt the ecosystem by gaining rights to programming from the studios and networks, which may undervalue certain content. In fact, Moffet says that licensing to Netflix is like crack to the networks. “The networks are addicted to licensing content to Netflix.” The problem will exacerbate at the time when digital demands only the good content from networks ,instead of all content.
Don’t expect unbundling to happen anytime soon,according to Moffet. “It is harder to blow up the ecosystem than you think. The reason you can’t get networks unbundled is that programmers don’t want to sell it that way.” The forced packaging of smaller niche networks (or highly expensive but not universally popular networks) with their larger mainstream siblings keeps both programmer and MVPD profitable.
Right or wrong,
many of these ideas are provocative and make good talking points. It remains to be seen whether they have stamina in the marketplace and will predict what’s coming. Stay tuned.