Commentary

Is True Widespread TV Cord-Cutting Here?

by Wayne Friedman , Staff Writer, May 3, 2016

Is TV cord-cutting still a thing? Proposed “skinny” TV packages should start to cause some acceleration of that activity. But not yet.

Many pay TV providers have been dinged from cutting back on traditional TV cord-cutting. But it is not always a solid declining trendline.

Take Comcast, the biggest U.S. cable operator. It witnessed a net growth in cable subscribers -- up 53,000 in the first quarter 2016.

Since traditional pay TV packages can still cost around $100 a month, why isn’t the OTT services of Sony’s Playstation Vue or Dish Network’s Sling TV -- which can offer TV consumers TV packages for as low as $20 a month -- doing better to change the dynamics?

Perhaps we aren’t looking at the bigger picture -- as well the niche picture.

Bernstein Research says true TV cord-cutters tend to have “niche” tastes in TV programs -- a specific genre or even a specific TV program. In that regard, it doesn’t make sense to have 200 to 300 channels for that consumer.

But to those who watch a broad range of TV programming, between 9 and 15 channels, brand loyalty may be fluid. Maybe those 9 to 15 networks aren’t hard and fast. So having the option of 200 channels for those consumers is still good.

Now, premium digital video platform Hulu -- whose owners are three major media companies, Walt Disney, 21st Century Fox, and Comcast -- is coming out with a package as well, according to reports. It will cost $40 a month.

The key here: Hulu owned by media companies that own three of the four big broadcast networks. CBS also entered the ring some time ago with its low price, $5.99/month, CBS All Access OTT service.

So for all this TV, consumers can now get their usual traditional TV networks -- and selected cable TV networks owned by those big media companies -- for around $46 a month. This is more cord-shaving than cord-cutting.

But don’t expect other pay TV providers to take this lying down. They’ll come out with their own OTT services -- even if it secretly might hurt existing business. Dish may never allude to the word “cannibalization” and its Sling TV. Others who join the OTT business will avoid the same.

Still, it remains to be seen what specifically will see future cuts. Pay TV providers, TV networks, other content?

Here’s the real skinny: It’ll be TV on a diet.

cord-cutting, ott, tv

4 comments about "Is True Widespread TV Cord-Cutting Here? ".

Check to receive email when comments are posted.

Karl Brautigam from Foursquare Labs, May 3, 2016 at 10:49 a.m.
If anything, thise seems to be more of "cord cobbling," a term that was coined by Showtime Networks topper David Nevins. Consumers are subscribing to the services they desire in order to get the optimal channel selection that they desire and in many cases, can drop what they don't regularly watch fairly easily. It's not quite a-la carte, but it's close.
Reply

Ed Papazian from Media Dynamics Inc, May 3, 2016 at 11:15 a.m.

Of course there's a certain amount of cord cutting, driven in large part by the rising prices of the bundlers. However, we should remember that not everyone views TV at the average rate. Approximately one tenth of all adults watches roughly 24-28% of all TV content. A second decile watches about 16-20%. Put these two heavy viewing groups together and you get one fifth of all adults doing about 44% of all viewing. This has an effect on channel preferences. The average person watches about 15 channels per week for at least 5-10 minutes, however heavy viewers watch many more than this average---probably 20-22 channels. And, over time most people sample channels that they haven't seen before or watched a season or so ago---- but now they run into these channels again, with new programming. As this sampling continues a new channel---or several new channels---may be added to the list of personal faves, while an old favorite---or several old faves--- grows stale and no longer interests the consumer. Without this ongoing sampling process how is the typical adult to determine exactly which channels he/she wants and buy ---forever.

Also, there is the question of household vs. personal preferences. Won't homes with kids want to include one or two cable kid channels plus PBS on their list? And what if the husband wants lots of sports but his wife wants Lifetime or WE? So, now, the household's collective interests, as opposed to each individual's likes and dislikes, comes into play---which usualy means more channels are needed, not less.

In short, it's pretty complicated and the tendency over time is to want more channels than we are using in a given day or week.

Paula Lynn from Who Else Unlimited, May 3, 2016 at 7:25 p.m.

You need a spread sheet for your spread sheet to find "your" shows and shows of shows. Relationships are complicated. (Comcast triple play is up to $217/mo, without negotiation and with it down to $202.) Since the VOIP is only about $10, people usually leave it on as a backup and a number they rarely if ever use if they have to have a number for a purchase, etc.)

Ed Papazian from Media Dynamics Inc, May 4, 2016 at 1:31 p.m.

The new Hulu "skinny package" deal which will, no doubt, offer Fox, ABC and NBC generated content to subscribers at $40 per month is a very significant step. I assume that this offer will only include broadcast and cable content generated by these program sources---including the Fox News Channel, ESPN, Bravo, USA, etc. as well as the broadcast networks' own content. If a typical "package" involves only 25 channels and shuts out all of the competition, including CBS, average minute ratings for the Hulu partners among subscribers to the new service should rise significantly. As for the revenue potential, just do the math. If only two million homes sign up, Hulu will take in $80 million per month or $960 million, annually. If Hulu gets 4 million subs theyearly take rises to $1.9 billion. That's not chickenfeed.

Obviously the risk is that the cable systems and/or satellite distributors will trim back the transmission fees they pay to these programmers, however there is far more to gain if the venture suceeds so this risk is justified. Which leaves me wondering about CBS. In addition to its stand alone SVOD platform, will CBS join hands with other programmers---say, Turner and Discovery, for example----to launch a rival service? If so, this could get really interesting.