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Summary:

The cable and satellite industry in the U.S. has begun to show some weakness, with the first-ever decline in pay TV subscribers last quarter. But data from the European Union shows that cable subscribers there have already decided to stop paying for cable TV services.

cable mess

We at NewTeeVee are big believers that cord cutting is real, and it’s just a matter of time before average consumers begin to find free or cheap alternatives to their expensive monthly cable bills. The trend has been slow to take shape in the U.S., but the cable and satellite industry here has begun to show some weakness, with the first-ever decline in pay TV subscribers last quarter. However, data from the European Union shows that cable subscribers there have already decided to stop paying for cable TV services en masse.

Strategy Analytics reports that in the European Commission’s latest household communications survey, there’s evidence that consumers there are transitioning away from pay TV services and opting for free alternatives instead. According to the survey, the percentage of EU households paying for cable TV fell from 34 percent in 2008 to 30 percent in 2009, which is a loss of around 8 million cable subscribers in a year.

So where’d those subscribers go? It’s not that they’re no longer watching TV — they’ve just found alternative ways to do so.

Some of those viewers are still paying for TV, but paying different services. The number of EU consumers watching TV via satellite increased 2 percent, to 24 percent of households, while IPTV penetration in that period also increased from 2 percent to 4 percent.

However, the biggest gainer wasn’t another paid service, but free, over-the-air TV. The share of households that viewed digital terrestrial services increased from 12 percent to 23 percent in that time, while the share of analog terrestrial viewers fell from 41 percent to 34 percent. That means that it’s not just those watching analog signals switching to digital TV antennas, but those that had formerly subscribed to cable are now also tuning in to digital over-the-air signals.

Of course, the drop in cable subs has been more pronounced in some geographies than in others, but the decline in the Benelux countries has been particularly shocking. Strategy Analytics reports:

Cable’s decline has been little short of dramatic in Benelux. For years, visitors to those countries were told that the “only” way to receive television was through a cable network. Even though cable TV penetration strictly speaking never reached the 100% mark, it was certainly in the 90%+ range for many years. Now, according to the viewers themselves at least, cable is used by only 69% of Belgian households, a decline of 18% in one year. This was mirrored precisely by the increase in digital terrestrial usage over the same period. In the Netherlands, cable usage fell to 75% of homes, with digital terrestrial at 21% by the end of 2009.

In the U.S., fears around TV viewing being replaced by over-the-top video have been much more prevalent than concerns over viewers using digital antennas. And while the use of free, over-the-air signals in Europe has always been higher than in the U.S. — at least in recent decades — the number of former cable subscribers taking to digital antennas could be a model for Americans wishing to access some linear TV programming without having to pay for it.

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  1. Yes I think so. I cut the cord during the past few months and am more than happy. Once consumers discover the quality and abundance of great online content they will make the switch.

  2. The debate of Over The Top (OTT) being friend of foe to operators continues. Monaco Telecom has embraced it and launched a Hybrid TV service earlier this year that blends broadcast and broadband content into one service. They are making OTT services work to their advantage by aggregating broadband content and delivering them as branded channels in their TV line up, its driving APRU and reducing churn. Telcos are also harnessing the power of OTT. Slovenia Telekon has also launched a ‘blended’ service using OTT to create a host of new TV channels including branded FaceBook and sports highlight channels. Telstra is doing something similar in Australia, establishing its TV play by bringing its PC BigPond brand OTT to the TV via their T-Box. They are creating some interesting business models too in a market which is used to metered services. The challenge, or at least one of them, now for operators is to get to market quickly and offer these new, hybrid TV service before pure play OTT providers and before customers cut the cord once and for all.

  3. Would be interesting to see historically how European TV consumers paying habits compare to US viewers.
    Is Euro a predictor? Any correlation between the two?

  4. The quality and quantity of European cable system infrastructure generally lags behind those in the US. Many have not even been upgraded to digital. In many parts of Europe including areas in Benelux, there is a very limited programming selection due to distribution capacity and broadcast plus Internet-distributed video is a more viable competitor. Cable programming is just not as plentiful or as popular in Europe. Another factor suppressing programming supply is language fragmentation.

    In the US, watch for either increased distribution of current “cable” programming via Internet or emergence of comparable new programming sources developed for Internet delivery.

    So long as the cable operators–through their contracts with programmers–lock up “cable” programming and restrict Internet delivery to “TV Everywhere”, cord cutting will grow less quickly in the US than in Western Europe.

    1. @maximus, a point of clarification, “TV Everywhere” is an attempt by legacy MSOs to restrict access to channels — not programming. As an example, selective Showtime, Starz and now NBC network content libraries are already available via Netflix — other content sources are sure to follow.

      Moreover, it’s the under-reported pay-TV service downgrading (dropping premium channels like HBO) trend that is making it very difficult to attract more subscribers to the TV Everywhere offerings.

      My point: the value proposition assumed continued exclusivity for MSOs — which clearly is not the current trend, given the increasing OTT distribution of much of the same content.

  5. Come on “cutting the cord” generally means moving from a traditional tv platform, including satellite, cable, terrestrial, to a web tv offering. The fact that Europeans are dumping cable to take up digital terrestrial I wouldn’t class as cable cutting in the sense that it’s meant in the US

    1. Sorry, but have to disagree with you. Cutting the cord generally just refers to no longer paying a cable provider. Why should we limit it to people getting content over-the-top when there’s plenty of free OTA content available as well?

  6. I suspect that this may be not just be a case of cord cutting, but also Cable losing market share to new competition such as IPTV and new digital broadbast providers.

    Unlike in the US, digital broadbast is not necessarily a free service. In the Netherlands for instance, KPN operates Digitenne (http://www.digitenne.nl/) which offers cheap basic packages using over the air digital broadcasting.

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  9. David Coakley Friday, November 5, 2010

    Yes, the trend to cut the cable cord will accelerate. An example of some anecdotal evidence is from my own experience.

    We cut our landline phone service giving up a # we had for over 20 years. Anyone that needs to find us can find us via Google, Facebook, LinkedIn, etc…. More recently we cut off our DirecTV service and bought a digital antenna. We get most all of our favorite shows including football so we think it’s well worth the $80/month in savings.

    I work for Retro TV, which broadcasts classic TV shows via free over-the-air in over 100 markets already. We also launched TUFF TV, which serves up shows for the young crowd. Over the next few years we’ll be adding numerous other new channels providing the expanding free over-the-air crowd some quality content to watch totally free.

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