The Impending Move To Cord-Cutting Signals Massive Revenue Shift For TV

In the next 12 months, the concept of cord-cutting is going to really take hold — a huge opportunity for television companies, as they continue the shift to become digital-first and look to replace revenues lost from the traditional cable consumer.

Until now, cord-cutters were digital natives with no ties to standard television: younger, mobile-oriented consumers, many of whom had yet to lay down roots anywhere and were in the early stages of their careers, where income and continuity can almost be considered a luxury.   The tipping point is approaching, however, as customers now have more options allowing them to untether from traditional cable companies.  Products like Apple TV and the rumored Apple television subscription service are making headlines, as well as stand-alone offerings from HBO, CBS, Hulu and more.  Meanwhile, Netflix and others create digital-only content that rivals anything produced by the traditional networks.  The general mass audience is intrigued by not being tied to a cable subscription, which can cost from $100-$250 per month range.  This is not a small amount of money, and many people would love to eliminate that cost.



For me, cord-cutting depends on three things.  First, I need access to local TV, primarily for local sports.  Second, I need access to ESPN on digital devices, but not tied to a cable subscription like the current Watch ESPN app.  Third, my wife needs HGTV and all the “house-hunting” shows it broadcasts.  For my family, this would pretty much take care of things. If I could access all these online, the cord would be cut tomorrow.  

According to my my recent informal polls, my family exemplifies a number of other households. With the exception of a few cable channels, I’d say most consumers in the 25-49 demo, a valuable demo for advertisers, are ready to make the switch. That means cable companies are teetering on the brink of a ton of lost revenue, which is why the convergence of digital and TV is so inevitable. Cable companies are going to have to find ways to replace all that lost subscription revenue somehow — and they have to address this problem quickly!  Digital advertising comes to mind, along with app subscriptions and other, more innovative ideas.

Overall TV viewership is still increasing, but one would argue it’s because of the confluence of channels and devices enabling viewership.  Still, while viewership may be increasing slightly, the shift in format means a loss of revenues.  It’s less expensive for me as a consumer to subscribe to two to five core stations for my viewing, than it is to subscribe to cable.  The net-net is similar to that in the media targeting world: similar content, but less waste.  I don’t need to pay for the other 250 stations if I only watch three to five of them! 

While the availability of many options used to be a strong selling proposition for cable, it is holding less and less value for time-starved consumers, who barely makes it through the week multitasking as it is.  As a full-time parent and full-time member of the workforce, I find watching TV at home is a luxury I seldom indulge.  TV is something I watch on airplanes and on the train to or from the office.  Sitting around at home and watching TV on the couch is a thing of the past; the only appointment viewing I have left is for sports events, a rare occurrence.

The TV industry is going to start trying new initiatives to get that revenue recovery underway.  This is why most people believe that digital media won’t surpass TV, but instead, digital media will simply merge with TV into a single, multichannel, video experience.

Are you ready to cut the cord?  What’s holding you back?

6 comments about "The Impending Move To Cord-Cutting Signals Massive Revenue Shift For TV".
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  1. Craig Mcdaniel from Sweepstakes Today LLC, August 5, 2015 at 3:02 p.m.

    I think there is another set of factors and this deals with contents expense. In a free market, cost is past on from the producer to the distributor to the consumer. For a TV show, say the Walking Dead, it cost a ton to produce a show. The consumers likes the show and the advertisers feel that the show is a good investment.  The problem is the Walking Dead is limited on the number of show they can produce in a year.  In fact, there are very few shows per year. This time gap is a killer.  Whereas, a website like operates 24/7/365. We have thousands of people who are addicted to entering the sweeps and spend severals hours a day. Both the Walking Dead and are entertainment but what has changed with cord cutting and the entertainment desires is the immediate access for fresh contents. So the cost of cutting is lower and the contents has improved.

  2. Ed Papazian from Media Dynamics Inc, August 5, 2015 at 5:03 p.m.

    The assumption that  countless millions of people who now watch 15-20 channels per month and more over a longer time frame, will dump the cable "bundled option" to supposedly save money by subscribing to only 3-5 channels on an unbundled basis, just doesn't make sense as a mass movement. Sure, a small number of generally lighter and more selective viewers will go for this concept, but they will be vastly outnumbered by those who don't. What's more, in the unbundled world that the theorists envision, many of the selectively programmed channels we now get as part of our cable bundles wont exist. Instead, we will have the broadcast TV networks, their stations, independent channels, PBS channels and the usual cable suspects---ESPN, CNN, Fox News, The Weather Channel, Turner, Discovery, etc. to pick from, plus Netflix, Amazon, and some others. 

    Just ask yourself which five channels you would subscribe to for your household with the penalty being that you could no longer watch anything but them? OK, you picked Netflix. Great. Now what do you buy for news? CNN, Fox? How about sports? That's easy, you pick one of the ESPN channels, right? How about the kids.? Again that's easy, its Nikelodeon. That leaves you with one more channel to buy. What will it be? PBS?, CBS? NBC? ABC?,  a local station for hometown news, Discovery?,etc.etc. 

    In a totally unbundled world, the more likely scenario calls for an average household subscribing first to a few channels, then adding more and more, until its full entertainment and informational needs are satisfied. If the channels have the sense to require firm long term contracts in exchange for price reductions, and this ploy works, many subscribers will be locked in to particular lists of channels so as they add more and more their spending will increase, not decrease. And who is to control the pricing of the surviving unbundled channels? What guarantee is there that they will treat consumers fairly? Is unbundling, as described, with total freedom of choice, really a good thing? Will we really get to pick from hundreds of channels or will ,the menu shrink dramatically, as many selective channels drop by the wayside, thereby leaving us in the hands of the current TV Establishment"?

    Would that be a good thing?

  3. ida tarbell from s-t broadcasting, August 6, 2015 at 2:50 p.m.

    The dropping of cable and satellite is because its too expensive.  Also, there is the impulse toward ala carte.  But that doesn't mean people harness themselves to anything but their antennas at first.  The author's impulse toward ESPN as mandatory puts him in a class than includes just 35% of viewers.  ESPN was the beginning of the end for Cable and Satellite.  It was always too expensive and rallied against the interests of ordinary viewers.  When Disney forced The Disney Channel to high priced non-premium channel, another die was cast.  Later the big Four networks started using first their own station group clearance, later allied with affiliates, to push junk like the Soap Network onto cable.  Many cable operators knew even then there was trouble ahead.  And now its here!  Viewers are going to try and free themselves from these absurd entangling alliances.

  4. Steve Symonds from Symonds Associates, LLC, August 6, 2015 at 4:47 p.m.

    Oh, please rein in the hyperbolic heavy-breathing. At present the total OTT economy constitutes less than 10% of the total Pay TV economy. When you start with very low numbers sure doubling or tripling growth can happen quickly. That's the "law of small numbers" effect in operation. The next 12 months will see more growth - but "massive" only in the sense that OTT may well achieve 10% as compared with 5% of the total Pay TV economy.

  5. Doug Garnett from Protonik, LLC, August 6, 2015 at 6:15 p.m.

    Fascinating Oracle based spin... "The Impending Move...". Really? There are many Silicon Valley companies HOPING there's a move (and I'd expect there's hunger at Oracle for a great portion of data revenue based on the theory advertisers will have to go searching after those customers with...big databases).

    But the title "Impending" is vast overstatement. Sure, tech biz has convinced itself this is inevitable. Yet that's the way the tech biz is. Envision something the predict it and hope to create a self-fulfilling prophecy (especially if there's enough VC money behind it).

    Still, there's no evidence that the majority of consumers WANT to cut the cord. I hear passionate discussions of this...from people who don't want much TV and are using Cord Cutting to avoid a big bill for something they don't use. But that also means I'm not paying for them in my advertising dollars.

    We will see where this all ends up. But the spin is really ghastly...

  6. Claudio Marcus from FreeWheel, August 7, 2015 at 9:15 a.m.

    To add to Ed's comments, when we think about the potential for cord-curring it is important to consider the relative cost/value for different segments relative to their affluence and time spent viewing. Cord cutting is likely to be attractive to less affluent light TV viewers (such as recent grads that are still single). However, less affluent heavy TV viewers (and there are many of them), the value of pay-TV relative to other entertainment options or the cost of substituting with a la carte OTT or selective pay-TV channels is not likely worth the trade off. For more affluent light TV viewers, OTT is more likely to be an add-on rather than a substitute, as overall TV/video viewing costs represent a lower proportion of their overall entertainment expenses. And for more affluent heavier TV viewers, the value proposition is even stronger. As such, I do think that overall OTT adoption is likely to be additive rather than a substitute for current pay-TV services. 

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