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Cable Technology Feature Article

April 21, 2009

Still No Cord Cutting, Says Parks

By Gary Kim, Contributing Editor

Nothing keeps cable TV executives awake at night more than the concern that the current recession, couple with availability of entertainment options less widely available in previous recessions, will do damage to multi-channel subscriptions. Nothing seems more worthy of repeating by observers than that extensive video cord cutting is happening now, with subscribers abandoning cable TV service for online alternatives.
Perhaps something more significant will show up as first quarter financial results are released over the next several weeks. But it is worth noting that fear of cannibalization so far is not borne out by actual consumer behavior, though we should all have new data points soon.
With that as a backdrop, analysts at Parks Associates (News - Alert) continue to estimate that U.S. consumers are reluctant to engage in such cord cutting, and that, as a result, demand for cable TV and related video packages will remain “strong,” with revenues exceeding $11 billion by 2013.
“Currently 37 percent of U.S. digital cable customers use premium video on demand regularly, up from 21 percent in late 2004,” says Kurt Scherf, Parks Associates principal analyst.  “The cable companies need to use this type of service to combat challenges from telco IPTV (News - Alert) services, which grew over 110 percent in subscriptions from 2007 to 2008.”
The danger for cable operators, in other words, is the same thing telcos face with respect to their voice business. If there are changes in cable subscriber numbers, for example, it almost certainly will be because of market share shifts, not cord cutting.

In fact, overall consumer use of voice services at home has not decreased much over the last several years, even as telcos have shown consistent line losses. Most of the losses are simple market share shifts to cable and other competitors. Wireless substitution is a factor, but apparently so far not as great an issue as cable picking up market share.
That’s increasingly going to be the story for cable operators over the next several years as well: they’ll lose customers, but not primarily because of cord cutting. Telcos will pick up most of the lost customers.

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

Edited by Jessica Kostek