Commentary

Netflix Is Rivaling Cable, But Will Consumers Buy Multiple Services?

TV business data comparisons can always offer some “ah hah” moments. But much of this can be window dressing.

Let’s look at cable operators and Netflix, shall we?

U.S. cable operators -- part of the overall pay TV system, along with satellite and telco companies -- now total 48.6 million subscribers as of the end of the first quarter 2017, according to the Leichtman Research Group.

It’s been dropping for some time, as part of overall traditional pay TV slippage. What's that mean to you?

Well, some have gotten their knickers in a twist when comparing this 48.6 million number with Netflix, the big subscription video on demand platform, which has over U.S. 50 million subscribers (and nearly 100 million globally). The underlying message: That new TV digital media has really come of age.

But look closer, it’s a big more complicated. It isn’t an either other situation — at least currently. Many U.S. cable subscribers also have Netflix, or other subscription video on demand platforms, such as Hulu or Amazon.

And it leaves out a big piece of the conversation: Satellite pay TV providers now total 33.2 million subscribers, while phone companies video services -- including Verizon FiOS and AT&T U-verse -- total 9.8 million, according to Leichtman. Add in new 1.7 million virtual pay TV providers -- in particular Sling TV and DirecTV No -- and the total hits 93.3 million U.S. pay TV subscribers.

Perhaps that last number is what we need to address -- as well as the aforementioned data of TV consumers who subscribe to multiple TV services -- traditional, digital, and otherwise.

Many believe more fractional pay TV services — which includes a skinny collection of TV networks on digital services and individual network-apps, as well as full-fledged traditional pay TV service — mean TV consumers may elect to pick and chose in different combinations of TV sources.

What about those Netflix subscribers that can access the SVOD platform through cable operators set top boxes, such as Comcast’s Xfinity X?

One earlier study from Ampere Analysis said TV consumers who now only subscribe to traditional pay-TV services fell to 30% in early 2017 -- down from 49% in late 2015. But those who solely rely on a pay-TV service or pay-TV in combination with an SVOD service have been at a consistent 70% level.

Fuzzier data: while traditional pay TV subscribers may be declining, new services have been established. Two virtual digital services, each owned by Dish Network and DirecTV, are slowly adding business.

Finally, Todd Juenger, senior media analyst at Bernstein Research, says one focus group shows limited OTT interest overall: “The only consumers interested in the OTT skinny-bundle concept are existing pay-TV subs (usually those with the largest, most expensive packages).”

Yes, Netflix is big glaring disruption to the TV ecosystem. But going forward, the picture is cloudy -- and two big business subscriber numbers aren’t enough to make things clearer.

2 comments about "Netflix Is Rivaling Cable, But Will Consumers Buy Multiple Services?".
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  1. Ed Papazian from Media Dynamics Inc, June 15, 2017 at 7 p.m.

    Wayne, as I keep pointng out, reach is not the same thing as frequency, though you can't have frequency without reach. The fact that a few more homes now subscribe to Netflix than wired cable systems, doens't tell you much about how often the residents in these homes use the content thus provided. Depending on what data you use and how you calculate it Netflix accounts for somewhere between 3-6% of all TV viewing, including OTT. However, if you take all of the basic cable channels---and there are a lot of them--and consider their total viewing hours attained solely via wired cable systems, the percentage of total national viewing time is probably 20-25%. Which is much bigger than Netflix. My point is that while Netflix has developed a nice business and is about equal to a single broadcast TV network in total day time spent viewing tonnage, it can't hope to match the combined viewing totals of all of the basic cable channels--ESPN, Fox News, TNT, etc.---even if we limit ourselves to audiences attained via wired cable distribution. So Netflix is, no doubt, bigger ---in the audience attainment sense---than most cable channels individually,  but it is not bigger than cable in its totallity.

  2. Scott Christopher from McCulloch + Company, June 22, 2017 at 3:21 p.m.

    Also important to keep in mind the addressable audience. Netflix is obviously not ad-supported while cable still is and can still be utilized by brands to reach their audience. Its growth is relevant insomuch as it erodes cable subscribers - but most studies we see are showing many are adding these skinny bundles on top of SVOD or OTT services. 

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