For many years now, cable industry watchers have warned operators about the growth of “cord cutting.” This term usually refers to subscribers ditching traditional TV packages in favor of standalone broadband Internet, which is then used for connecting to on-demand video services. Did you know Netflix paid 300 million USD to stream Disney content? The ongoing success of Netflix, Hulu Plus and other online streaming options, paired with the decline in pay TV customers, is one of the best indicators of how prevalent cord cutting has become:
- According to the Pew Research Center’s Home Broadband Study from 2015, 19 percent of adults between the ages of 18 and 29 have cut the cord on cable or satellite TV. Another 16 percent had never even subscribed to one of these options.
- Two-thirds of Americans who do not subscribe to cable/satellite TV fill the absence by using alternative content sources, which are often grouped together under the banner of “over-the-top” (OTT) viewing. Netflix alone had more than 75 million subscribers worldwide as of January 2016.
- Among the study’s subjects, the high cost of cable was the most commonly cited reason (by 71 percent of them) for abandoning TV. Close behind was the inability to access content online or via an antenna (64 percent).
Preserving revenue and retaining subscribers in the world of cord cutting
How widespread is cord cutting? In the second quarter of the 2015 fiscal year, cable, satellite and telco TV providers together shed more than a half million customers, according to numbers compiled by Variety. At the same time, it is premature for cable operators to go into a full-on panic about changing media consumption habits.
How big of an impact has cord cutting really had on the cable industry?
For starters, cutting the cord has become more expensive. Monthly fees for OTT services as well as season passes on platforms such as iTunes can quickly rival the cost of a cable subscription, as Klint Finley pointed out in a 2015 article for WIRED.
But perhaps more importantly, cable providers control the critical “last mile” of broadband networks, along with the set-top boxes through which so much on-demand content is already consumed. As such, they have all the infrastructure in place to launch compelling video on demand options through services such as Evolution Digital eVUE TV.
The role of VOD in reducing churn and growing revenue
VOD platforms can help cablecos match the convenience of OTT viewing while also offering an even wider range of options than their new competitors. If you have ever been a regular Netflix user, then you know that the movie selection often gets thinned out at the beginning of the month, as various content deals expire. Many cable operators have the rights and the licensing to show a broader set of TV shows and recently released movies than what is available on Netflix et al.
“Cablecos can provide a unique set of content offerings.”
This gives them a unique combination of content offerings. Coupled with their traditional packages, VOD is the basis for a full spectrum of video delivered directly to consumers’ homes for viewing on any device. With operators slowly transitioning to all-IP delivery, VOD will only become more strategically important over time. It can be supported by hybrid STBs (i.e., ones with both a Quadrature Amplitude Modulation tuner and Ethernet/Wi-Fi for IP) and accessed from phones, tablets and other IP-enabled devices.
Cord cutting’s impact on the cable industry is still hard to determine. While many consumers seem to be moving on, cable executives have told publications like Fortune that the hype doesn’t match the reality on the ground, at least not yet. Even if it doesn’t, it is never too early for cablecos to begin thinking about integrating services like eVUE TV to shore up their VOD offerings and prepare for changing customer viewership habits.