Should Traditional TV in America be worried about Cord Cutting?

Over the past few years, traditional TV service providers have been agonizing over the rise of cord-cutters in the United States. However, their fears have so far been dismissed as nothing more than anxiety over competition, however, recent trends indicate otherwise. Recently, Wall Street analyst Craig Moffett, analyzed the data from the U.S. Census Bureau, to point out that roughly 1.4 million subscribers have disconnected pay-TV providers in 2014 alone. He also estimated that pay-TV has lost about as many as 3.8 million subscribers since 2010.

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Trends

Moffett is not alone in his belief that pay-TV will be encountering a storm soon. Although their numbers vary, the likes of Nielson and Leichtman Research, had also predicted a difficult future for pay-TV. Data collected by Nielson suggested that as pay-TV is losing subscribers, streaming video services are gaining customers. SVOD (subscription video on demand) services from companies such as Hulu, Amazon Prime, and Netflix, are availed by more than 40% of households. Leichtman, while agrees that pay-TV has lost customers, it draws attention to the fact that roughly 95 million households are still using the service.

 

Reality

Clearly, the trends and predictions are stacked against pay-TV. So does all of this mean that we will soon be seeing the end of traditional TV? Well, not quite so. Not everybody wishes to part with the traditional TV services. Actually, according to Clearvoice Research, only 13% of those included in their survey, conducted in early 2014, expressed intentions to discontinue cable services. Among these respondents, 74% said they would discontinue their cable service by the end of 2014. Yet, 6 months after publishing the survey data, only 22% of the people who said they would disconnect, actually did it.

One of the most prominent reasons for such a behavior is that video streaming, although brings more satisfying content, is actually quite an expensive alternative. When cable operators bundle up internet services for the customers, it really works out to be a great bargain. Another reason in favor of pay-TV is that, unlike them, streaming services have not been able to include all the channels that Americans still love.

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Evolution of pay-TV

A major contention in favor of pay-TV is that, they are also evolving to leverage the technology to their advantage. Their latest initiative is the concept of “TV Everywhere” apps. These apps will require people to login using their pay-TV credentials on their phones, tablets, laptops, and other devices, to enjoy streaming. Such capability will essentially give pay-TV providers the much-needed edge over the broadcast-only providers.

 

Technology co-existence

A number of analysts point out that even though many households have broadband internet connections, they still stick with pay-TV services. In fact, they view both the technologies as a complement to each other rather than being a substitute. As per Nielsen’s research, in the fourth quarter of 2014, users watched about 150 hours of live TV per month, while they watched only about 11 hours of videos online. However, it indicated a declining trend in the TV-hours from the previous period.

An interesting finding of the research was that the households with broadcast-only services, spent 122.6 minutes per day watching TV, while the households with cross-platform services, spent a whopping 265.5 minutes a day. Further, traditional households streamed about 5 minutes of video, while the broadband-households averaged about 11.2 minutes. The fact that neither group streamed even a sitcom’s worth of video, reiterates the fact that internet video-watching, as of now, is only a complement to traditional TV and not its replacement.

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Conclusion

There is no doubt that the threat looming over traditional pay-TV services is big and real. However, a deeper understanding of customer behavior indicates that the traditional TV can co-exist with the internet-enabled video streaming service. Radio service found a way to do that and the same is expected of pay-TV. Further, traditional TV services are also evolving to face the challenges of the changing business environment. By taking advantage of the very technology that threatens their existence, they intend to retain their large user base. Whether they will succeed or not, that is something we will know only in the next decade. For now, traditional TV service is quite strong and this is not going to change anytime soon.