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Cable Technology Feature Article

March 11, 2013

Consumers Say They'll Cut the Cord, But They Won't

By Tara Seals, TMCnet Contributor

Despite consumers saying that they’re interested in cutting the cord and saying goodbye to their pay-TV providers, the fact of the matter is, they’re not actually making good on their threats, disgruntled as they may be.

Cable bills have more than doubled over the last decade and the average bill — currently near $90 a month — will reach $200 in 2020, according to The NPD Group. Accordingly, it comes as no surprise that Morgan Stanley’s 3rd Annual Streaming Video Survey shows that 17 percent of pay-TV customers in an online poll of 2,500 adults are “willing to cut the cord over the next 12 months,” according to Deadline.com. And a full 8 percent said that they “definitely” will do so.

But let’s think about that for a moment. An attrition rate of eight percent, let alone 17 percent, would be a staggering loss in a year for cable, satellite and IPTV (News - Alert). That’s an insane amount of eyeballs flowing out of the $30 billion TV advertising ecosystem, for one, not to mention the obvious hit to subscriber revenue. All of that in turn would affect what companies can pay to carry content, and how much of its costs they pass on to their remaining customers.

So should traditional TV be worried? The thing is, you can’t trust a word these respondents say.

A full 16 percent gave the same answer last year, Deadline.com noted, and 15 percent in 2011. All while traditional pay-TV operators actually added subscribers in the United States.

Satellite players DirecTV and DISH, IPTV operators Verizon and AT&T, and cable companies including Comcast, Time Warner Cable, Cablevision Systems (News - Alert) and Charter Communications have already reported their pay TV subscriber data for the final quarter of 2012. According to SNL Kagan, on a combined basis, they gained about 220,000 pay TV subscribers. Sure, that gain is down from more than 300,000 added in the fourth quarter of 2011—but it’s still a gain.

“For 2012, the data from public companies so far points to a gain of around 500,000 subscribers, but that figure is expected to come in lower once privately-held firms are included,” the Hollywood Reporter noted. “For the full year 2011, the total pay-TV industry had added 280,000 subscribers, according to SNL Kagan.”

Even those companies that have been hemorrhaging subscribers quarter upon quarter, like Comcast (News - Alert), are seeing improvement. Comcast’s fourth-quarter loss of 7,000 subscribers for instance is its narrowest loss in nine quarters—and, the company hastened to point out—would have been nonexistent had it not been for the impact of Hurricane Sandy.

The same all-words-and-no-action effect is also in play when it comes to premium subscriptions. In the Morgan Stanley study, one quarter, or 26 percent, said they plan to cut down on the money spent there. That’s the same as 2012 (27 percent) and 2011 (26 percent). But, in 2012, HBO, Showtime and Starz actually added subscribers-- 4.8 percent more, in fact.

In case anyone was wondering, the survey purports to have a plus/minus 1.5 percent margin of error.

The findings do offer some other stats that may provide clues. A full 40 percent of viewers say they don’t buy TV shows or movies online because the price is too high. And indeed, the number of hours people say they spend each week watching movies on a TV set was up 9 percent to 5.7, even though Netflix subscribers say they like the over-the-top service because it doesn’t cost much ($7.99 per month) and offers a big content stable.  

That suggests that cable video on demand (VOD) strategies are offering perceived value to consumers. Of course, “on a TV set” could also mean via a connected gaming console or DVD/Blue-ray player, but in principle, it points to a thirst for consumers to still watch content on the big living room screen rather than anywhere else. And that gives traditional pay-TV operators an edge as incumbents in that environment.

"You don't see evidence of cord cutting or even cord shaving," Time Warner (News - Alert) chairman and CEO Jeff Bewkes said Monday at the Deutsche Bank 2013 Media, Internet & Telecom Conference in Palm Beach, Fla., laying it on the line. So far, he’s right.

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