Cord Cutting Will Go Mainstream When It’s More Like Pay TV

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While most of us in the world of tech generally fixate on what’s wrong with pay TV, it doesn’t hurt to examine what’s right. After all, if this cord cutter thing is to ever go mainstream, it helps to know what the competition is doing.

So why exactly do people pay for TV? Surveys show that consumers subscribe mainly because they value the bundle of content they get from their pay TV provider. Lots of channels, reliably delivered, with an easy-to-use interface.

And when you examine what consumers like about pay TV and what they like about the most popular over-the-top video services like Netflix, it’s actually comes down to much of the same thing: lots of content bundled together for them in a subscription package.

While pay TV generally provides more content than say, Netflix or Hulu Plus, these two over-the-top video services offer, or are trying to offer, a bundle that satisfies consumers enough to entice them to subscribe. And it’s when these subscription services become replacement services for the mass market rather than augmentative (which is what they are for most today) that things get interesting.

In order for OTT content bundles to become mass market replacement services, consumers need lots of choice, be it horizontal choice — meaning a wide variety of content — or vertical choice — meaning deep content targeted at niches — like sports fans.

And this week’s news shows that companies like Apple understand this. Apple’s deal to bring both Major League Baseball and NBA to the Apple TV is important because sports, particularly live sports, is one of the biggest reasons consumers get pay TV. By providing access to entire seasons through a subscription (at a price roughly equal to a monthly bill to a low-end cable package), this could entice more to cut the cord.

And it’s the live aspect of Apple’s announcement that is the biggest news, because it shows that Apple could provide live streaming of video channels as they are broadcast, allowing them to create a wider content bundle of linear channels for consumers that resembles, well, pay TV content bundles.

Microsoft, too, is apparently continuing to work towards creating a subscription service of linear channels for the Xbox 360, something the company has been working on since at least last fall. With an installed base close to 50 million, that’s a huge potential number of subscribers for any OTT video bundle.

So the secret to cord cutting becoming mass market is for over-the-top services to become a little more like pay TV, but without the high price (because that’s the main thing consumers don’t like about pay TV).  With this week’s news, it looks like we may be inching closer to that reality.

Read my weekly update at GigaOM Pro (subcription required) to read more about the value of content bundling in online video.

Image courtesy of flickr user jonlclark

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