Research: Over 1 million U.S. cable subscribers cut cord in 2011

10 Comments

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Cable and satellite TV subscription growth slowed down more than had been previously reported, and cord-cutting was a primary factor. But don’t worry about it — a revolution that will re-create the current multi-channel access paradigm is still a long way away. Those are the conclusions of research released Monday by Canadian research firm the Convergence Consulting Group.

According to the Convergence Consulting report, “The Battle for the North American Couch Potato: Bundling, TV, Internet,Telephone, Wireless,” 2.65 million American multichannel subscribers cut their cords between 2008-2011 and switched to over-the-top (OTT) services like Netflix (NSDQ: NFLX) to get their video programming. The report says that only 112,000 cable, satellite and telco TV service subscriptions were added in the U.S. last year — less than a third of the 380,000 added subscriptions that Leichtman Research Group reported last month while auditing only the top multi-channel programming services.

Regardless of whose number you use, the news isn’t great for the cable and satellite business, which from 2000-2009 added an average of around 2 million subscribers a year. Convergence Consulting believes migration of consumers to over-the-top services to is blame for this sudden drop-off and says the trend will only accelerate further in 2012. In fact, the firm projects the number of folks ditching their cable or satellite service in 2012 for OTT services to reach nearly 3.58 million.

Rather than sounding alarm bells, however, Convergence Consulting doesn’t believe these data points signal any kind of imminent threat to the multi-channel business.

“The revolution is not coming, at least not for a very long time,” Brahm Eiley, Toronto-based co-founder of the research group, told paidContent. He says that, as content providers (i.e. TV networks) continue to try to establish greater value for their movies and shows, they’ll continue to offer them through over-the-top distribution models. However, they won’t keep supplying their programming through these channels to a point at which serious degration of the traditional multi-channel access model occurs. In other words, if the cable and satellite business were to suddenly lose millions of subscribers rather than report narrow gains, Eiley doesn’t believe the major entertainment conglomerates would be as eager to sign deals with Netflix and Hulu.

He points to the $38.5 billion spent on programming carriage and re-transmission fees in 2011 by multi-channel operators compared to the $3 billion on programming spent by Apple (NSDQ: AAPL), Netflix and other OTT players.

“The leverage is clearly on the TV access side,” Eiley said. “The content providers know where their bread is buttered.”

10 Comments

Deno

While cord cutting will have an efect on the industry do not count on it being this earth shattering revolution. All of your OTT operation need to sign some kind of licensing agreement to carry all of thier streaming programming. And who owns the rights? Most likely those big media companies you think are going to fall by the wayside. Gone are the days when these agreements were cheap for OTT sources. Also remember that you need an internet connection for these to work. Who are the largest ISPs? The cable companies, and they are already contemplating subscriptions based on broadband consumption and other pricing models that will make many people contemplate whether cutting the cord will be worth it from both an economic and hassle standpoint.

carouselman

In the TV space, Netflix, Hulu and YouTube are great examples of over-the-top services, but don’t forget that Apple TV and Google TV are also OTT because they leverage the internet to go directly to users (effectively bypassing the existing broadcast and cable networks). One of the big takeaways from the 2011 Developer Economics report was that 2012 would be more than simply developing apps for smartphones and tablets; industries like TV would become ready for apps. Much of AppCarousel’s activities are centred on helping companies in the home entertainment sector to make apps a part of their solution: http://appcarousel.wordpress.com/2012/01/05/press-release-appcarousel-announces-app-store-licensing-agreement-with-myriad/

bloggerhater

“He points to the $38.5 billion spent on programming carriage and re-transmission fees in 2011 by multi-channel operators compared to the $3 billion on programming spent by Apple (NSDQ: AAPL), Netflix and other OTT players.”

The overhead required for cable and dish based set top services is unreal compared to basic internet streaming via OTT. ALL the major providers are currently rushing to put solid IP infrastructure in place to try and produce their own low cost digital streaming. Sadly the battle lays on the lines of content control and mind share.

The only way you are going to convince our generation to stick with the regular providers is to offer us a premium service with no advertising.

Once the baby boomers die off it’s going to be the end of cable/dish as we know it.

Alex Porter

if this trend continues the major service providers will probably start to complain to congress that they need to outlaw services like hulu and netflix. seems only natural after the mpaa and riaa pushed for such when people realized that they could more wholly own their music by stealing it rather than buying it.

AtomicCEO

Prices need to drop a lot. Cable may still have the edge on content, but once people realize that you can still watch broadcast TV and Netflix and save $100 a month, they start to wonder how they got tricked into paying that much to begin with.

KimD

I agree with Sheldon! At least with my satellite provider they switch up the channels monthly so I’m not stuck enduring crap!

Jeremy Toeman

countdown starts – no more than 30 days from now until a post written on how the cable/satellite companies are gaining subscribers.

file under: meaningless rabble rousing info.

Sheldon Steiger

In much the same way that record companies were forced to stop bundling twelve bad songs with one or two good ones on an album, cable companies will now have to stop forcing subscribers to take one hundred channels of crap just to get the one channel they want. The media world is moving consistently towards an a la carte model.

Ed

3.58 million people ditching cable/sattelite next year and the brilliant consultant does not see the revolution as coming soon? Typical head in the sand mentality of the cable providers.

Jason Gerard Clauss

Yeah. They’re probably assuming a linear decline rather than exponential. Derp.

And with the garbage that Big Media is putting out, their decline will only accelerate.

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