Commentary

Pay TV Services: Cord-Cutting Data Isn't Cutting It

by Wayne Friedman , Staff Writer, February 26, 2019

We keep hearing about growing cord-cutting. But even assuming the worse, what really changes over the next five years? Very little. Then again, millennials may disagree. You can take that to the bank.

Even with the a 3% to 4% decline per year, traditional pay TV services still have the lion’s share of business -- some 90 million subscribers. Those internet-delivery pay TV services -- like Sling TV, Hulu with Live TV, and DirecTV Now -- are around 7.5 million.

And two of those just mentioned -- Sling TV and DirecTV Now -- are owned by Dish Network and AT&T, which have traditional satellite delivered businesses that are declining faster than other pay TV.

Right now, adding in all current U.S. pay TV businesses -- traditional and virtual growth -- the numbers are slowing down. There was a 1% decline in all U.S. pay TV services in 2018.

Now, that may not be much. But it might say what many have been thinking for some time. There is still not enough flexibility for consumers -- especially those who want to pick and choose individual OTT services (you might called them "networks") they desire.

Older media consumers are probably not in this category. But younger consumers -- on the move, needing fewer commitments, perhaps with less financial wherewithal? That’s possible.

Some believe new technology companies -- Roku, Apple and smart TV manufacturers -- have a role to play in this transition. That is, “if they unify the content and improve the ease of use in accessing that content,” according to Concentric, a simulation software company.

Unify? Is that what the modern consumer really wants? Not necessarily. (They want ease of use and accessing content -- which remains a challenge.)

What about brand loyalty? Older customers have it. But millennials? They aren’t even loyal to specific banks.

Research from Marqeta say only one out of six millennials (17%) said they couldn’t imagine ever wanting to change from their current banking partner. That means a lot of shifting going on.

Banks seems a more serious decision than deciding on a monthly cable/entertainment or Netflix deal. So for these consumers, that can’t be stable news for media companies.

banks, cord-cutting, streaming, tv

6 comments about "Pay TV Services: Cord-Cutting Data Isn't Cutting It".

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Michael Smith from Michael Smith Media, February 26, 2019 at 2:43 p.m.
I agree that cord cutting isn't currently as significant as many think. But cord cutting is a lagging indicator. The leading incator is actual time spent using Pay-TV, which is down dramatically. During the rise of cell phones, landline phone talk minutes declined much faster than landline phone customers. It takes some time after people stop using a subscription based survice before they get around to cancelling it, espcially when canelling requires some friction.
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Leo Kivijarv from PQ Media replied, February 26, 2019 at 3:18 p.m.

The early adopters of cord-cutting have cut the cord, so the question becomes who will join the revolution and the answer is not as many as some have predicted. It's all about value and the cord cutters are finding that subscribing to multiple streaming services becomes almost as expensive as basic service through a Pay TV provider. If the Pay TV providers ever go to an alacart model, the streaming services might se a drop in subscribers (bundling always is a better value than multiple individual purchases)
As to time spent with Pay TV, it is incoorect that usage is decelerating. It's actually acclerating when you combine all the screens in which cable programs can be viewed. If limited to linear TV, there has been a decline, but not as significant as some would think according to the PQ Media Consumer Media Usage & Exposure Forecast Series, in that older audiences have always made up the lion's share of viewers and they aren't cutting the cord that much.

Ed Papazian from Media Dynamics Inc, February 26, 2019 at 3:55 p.m.

Leo, you beat me to it. I agree with you on boith counts. Regarding how much "TV" is being consumed, all one has to do is look up the reports on Nielsen's website to get a feel of the true situation. As we point out in "TV Dimensions",whenever there is an explosion of platforms all offering what could be regarded as "TV" content, the inevitable result is and has always been, an increase on overall consumption. The increase is always small compared to the amount of added content--but viewing goes up---not down---when there's more to watch.

Michael Greeson from TDG, February 26, 2019 at 6:35 p.m.

The term itself is anachronistic, increasingly fuzzy and problematic in contemporary discussions. Then again, when it refers to cancellation of (themselves old-school) cable/sattelite fat bundles at fat prices, it's appropriate.

James Smith from J. R. Smith Group, February 26, 2019 at 8:29 p.m.

Leo/Ed: Agree with you on many points but I have several related questions. 1) What happens when the baby boomers start vacating this earth in large numbers? 2) How much of the cord cutting is fundamentally due to, no other way to put it, bad programming content by traditional incumbents? 3) How does per-subscriber/re-trans fee structure, no matter what platform, play into this? Best I stop with just that set of question.

Ed Papazian from Media Dynamics Inc, February 27, 2019 at 6:42 a.m.

James, if the past is any guide, as the current younger generation ages it will become more and more sedendary and be home more often, hence it will need some form of TV to kill the time as well as provide entertainment, news, sports, etc. This does not mean that the new oldies will insist on " linear TV" as their means of access, or, for that matter, over-the-air or digital. That remains to be seen.

As for the "poor" quality of TV content---talk shows, game shows, reality shows lousy sitcoms and dramas, too many reruns, etc.---- we must remember that a large part of the population---even if college educated----is not all that smart nor demanding in their tastes. If we mean "Game Of Thrones" as an example of "good programming and others of the same ilk, it takes a lot of viewer involvement to consume such programming ---much more than say, a "Dr. Phil", "The Real Housewives Of Podunk" or a rerun of "Gilligan's Island". If all we had to watch were highly involving "good" programs, many of us would burn out or overdose on such content and probably we would watch less.

Regarding retransmission fees although the cable systems and satellite companies are suffering subscriber losses they still are quite profitable and can afford to reimburse the program suppliers---cable channels and TV stations---for the use of their content. It may develop that as the TV Establishment ventures into the subscription arena in a big way that these efforts will involve duplicated content---the same shows offered to subscribers as well as used as ad-carriers by the cable channels and stations---as opposed to original fare created for subscribers only. In that case we may see audience canibalization take place. However, I expect that this will not happen and that re-transmission fees will remain a major part of the profit structure of the cable channels and TV stations---who will share the dollars with their networks--- for some time to come. It is also likely that Netflix will launch an ad-supported platform which will alter the balance of power and spur counter reactions of unforseen consequences.