Why Cord Cutting Is Great for Cable Subscribers
The digital video world is moving fast with connected devices and smart TVs. While a couple of years ago a Saturday night trip to a spacious Blockbuster rental store was part of the “movie night” tradition, it mostly got replaced by instant digital downloads, or by automated kiosk systems like Redbox (in case your home setup still requires DVDs, or you can’t live without high-end Blu-Ray DTS audio).
Meanwhile instant access to digital content impacts traditional cable subscriptions. Interestingly even though “cord cutting” is happening, it’s not yet a mass movement. Comcast as example does not appear to feel too much pain.
In second quarter 2011, Comcast lost 238,000 TV customers, compared to 265,000 a year earlier, though the company was making up for these losses with increases in services other than TV. Moffett said the slowing rate indicated that online sources were not making people drop cable as quickly. [via Wikipedia]
An interesting parallel trend are “cord-nevers”, young people who grew up with video distribution over the Internet.
On November 28, 2011, a report by Credit Suisse media analyst Stefan Anninger said that young people who grew up accustomed to finding shows they wanted to watch online would be less likely to subscribe to pay-TV services. He used the term “cord-nevers” for these people. And in 2012, Anninger predicted, the industry would have 200,000 fewer subscribers, for a total of 100.5 million. He blamed the economy, but said consumers were not likely to return to paying for TV even after the recovery. In the case of land-line telephones, people believed young people would eventually get them, but now a large number of people have mobile phones. The same will be true for pay TV, Anninger predicted, and lower-priced packages with fewer channels will become necessary to reverse the trend. [via Wikipedia]
What does this mean for existing cable subscribers? In the past, your residential area might have been served by maybe 1-2 cable or satellite providers, and competition was limited. Now with the increasing cord cutting competition (even though cord-cutters end up paying for Internet, likely for a significantly increased fee), cable providers need to improve their offerings to justify the expensive subscription fees.
Cablevision is a great example of adding additional value to their traditional services. Besides providing numerous TV-Everywhere offerings (e.g. to watch content online via HBO GO), subscribers get access to the linear channels on their iOS devices or PC/Mac desktop – for free, included in the subscription value. The lines between “traditional cable” and “digital” are blurring. More competitive service offerings result in mostly one winner: the existing cable subscribers, who get additional free value.
But will digital services be able to attract and convert the new generation of “cord-nevers”? If cable providers continue to innovate their digital offerings, maybe – but one thing is for sure, no matter what your digital distribution channel is – high-quality content will always be valuable, and has to continue to be valued to remain good.