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Cable Technology Feature Article

September 20, 2011

Dish Gets Ready to Launch Blockbuster Streaming Service

By Gary Kim, Contributing Editor

As Dish Network gets ready to launch its Blockbuster streaming video service and Netflix sorts through the fallout from its price plan changes and decision to separate the Netflix streaming and DVD by mail businesses, some would say pressure is mounting in the legacy cable TV business.

There are two different sets of problems. One is that there are a growing number of consumers who simply do not see the value in cable TV; they have the money to buy, but simply refuse to do so.

Over-the-top video was not a major factor in why some households subscribe to broadband, but not video, research by Leichtman Research Group recently showed. Just five percent of respondents who say they have broadband service but no video subscription said Internet video was the reason for not purchasing multi-channel video service.

Much more commonly cited reasons for not subscribing to multi-channel video included cost, cited by 28 percent of respondents, and not watching much TV, cited by 26 percent of respondents.

Another commonly cited reason was “having no need for a service,” mentioned by 18 percent of respondents. That, you might say, is the tip of the iceberg. That’s 18 percent of non-adopter respondents who just don’t value the product enough to buy it.

“While eight percent of all households in the U.S. get broadband but do not get a multi-channel video service, it is erroneous to think of this group as making decisions driven by online video,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group.

That such people are clustered in the Millennial demographic is especially troublesome, as Millennials represent the current and future market, while older demographic groups are necessarily a declining segment of the market.

The other problem is steadily-growing prices for subscription TV, moves that necessarily will provoke a response.

Steady revenue growth for cable channels isn't sustainable. There will soon come a point when consumers simply refuse to pay more, the Wall Street Journal says. Time Warner Should Reed Hastings' Lips

So far, the evidence of video cord cutting is not dramatic. Deloitte's (News - Alert) fifth annual "State of the Media Democracy" says hat the Internet, mobile and social media channels are enhancing the overall television viewer experience, driving people to watch first-run programs and live events during their initial broadcast as delivered by their multichannel provider. In other words, online channels largely are supplemental.

CTAM’s recent research similarly finds that more than 90 percent of people who watch programs and movies off the Internet on their TV sets continue to have a multichannel subscription. These are people who want more programming, not less. Only three percent in CTAM’s sample are even considering cutting the cord.

The latest ESPN (News - Alert) study suggests cord cutters were mainly middle-aged, middle-income households, and persons who are light or non-streamers. In short, cord cutters are more likely to be recession-challenged householders making hard choices about their expenses, such as the households that typically did not subscribe to pay TV before 2009.

The Convergence (News - Alert) Consulting Group projects that by the fourth quarter of 2011, the number of households dropping pay TV will reach 1.6 million.  Growing video abandonment

There now is growing evidence that the industry is seeing the churn-out of customers for “can’t afford it” reasons. Perhaps an equally big problem is an apparently growing number of people who just don’t want to buy subscription video, even when money is not an issue.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Rich Steeves