Aug 22, 2015

Why Cord-Cutting Remains An Unrealistic Option For Most TV Viewers

Originally published at TDG Research on August 20, 2015

Whilst there was much rending of clothing and gnashing of teeth about the Q2 2015 pay-TV subscriber statistics (along with a dramatic sell-off on Wall Street), a closer look at those numbers reveals a lot less gloom and doom than originally reported.

Yes, the top 13 MVPDs lost close to 0.5% of their subscribers last quarter (around 500,000). However, when you cull the top 13 down to the top nine, the results are a lot less negative. Not only did those top nine providers (responsible for close to 90% of cable pay-TV subscribers) manage to reduce the number of losses vs. Q2 2014 by half, they also logged the smallest number of Q2 losses they’ve had since Q2 ’08.

So is it all roses and unicorns in pay-TV land or should we hold on to our skepticism?

Right now, we’d have to say the roses and unicorns are winning. While pay-TV is facing a world of problems, cord-cutting (and even cord-nevering) appear to be the least of their worries.

Why is that?

For starters, unless you’re an infrequent TV viewer, the cord-free experience quite frankly sucks. This has been the case for a while now and the addition of new OTT services seems to have exacerbated the problem rather than ameliorated it.

Insignificant Cost Savings
As numerous reports have pointed out, cobbling together an OTT system that replicates a robust cable package rarely results in any significant cost savings, particularly now that there are more options. Once you’ve added on all the major streaming services (Netflix, Hulu, and Amazon), plus a kids-and-sports package from a virtual provider like Sling, plus access to HBO and Showtime, your package may well be as expensive than the one you were getting from Comcast. This may not be the case if you are among the 67% of ABUs (adult broadband users) with no children living in the home, or are an infrequent television viewer content with a package of three or four apps and limited access to live broadcasts, but more avid viewers (those watching 15 or more hours a week) and viewers who rely on premium networks, will not see considerable cost savings.

Inferior User Experience
Then there’s the interface, or rather the complete lack of one. While going from app to app may work on your phone, it’s not a particularly expedient way to watch television. There’s no way to keep track of what shows are on what networks, no cloud-based universal program guide, watch list or DVR. Again, this is not much of a problem for the casual TV viewer, but for someone who watches upwards of 10-20 hours of TV a week, having to keep up with a dozen or so apps can prove to be quite a hassle. Add in the fact that not every app is available on every device, and the joy of having to keep track of a half dozen separate monthly bills (not everyone believes in auto-payments, which can be more difficult to keep track of than standard bills) and the hassles really start to add up.

Nothing Lasts Forever
We’d be remiss if we didn’t note that pay-TV’s current advantages may not last forever. While a cloud-based universal program guide for OTT may still just be a pipe dream, it’s not in the same league as flying cars and we suspect some clever startup will figure out a way around the hurdles and introduce one sometime soon. For now, however, legal and technological issues prevent this from being a real option. And while Roku may have universal search on its devices, a feature rumored for the next generation of Apple TVs as well, a device-centric search and recommendation function is not the same as a cloud-based interface that works across multiple devices.

Cost may still be an issue, but if the customer experience is superior, then consumers may be willing to pay for a sleeker system that allows them more freedom and superior features even if the result is fewer channels.

A New Middleman
It’s also conceivable that OTT resellers will crop up; middlemen who’ll strike volume deals to bundle up various OTT services for a small cut, providing that elusive universal interface along with a single monthly bill. It’s a service many people might gladly pay for, rather than have to cobble together a system on their own.

Without a doubt legacy pay-TV is in transformation, and today’s viewers demand to watch TV on their own terms. But for now, getting rid of their pay-TV service won’t give them the changes they want and so we’re not likely to see a massive exodus anytime soon.

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