How Big of A Threat is Cord Cutting to Traditional TV?

For the past few years, we’ve heard the same prediction that this is the year that cord cutting really takes off. Here’s the thing, though: people wouldn’t keep making that same prediction if it had already come true. So far, subscribers have been more reluctant to abandon pay TV providers than many experts assumed. Data from Leichtman Research shows that the number of pay TV subscribers did decline last year. As an industry, cable and satellite TV providers lost 125,000 subscribers in 2014—but there are still more than 95 million pay TV customers in this country. So although losing subscribers surely got the industry’s notice, it’s not very likely to have them in panic mode. As pay TV loses subscribers, streaming is gaining them. In its “The Total Audience Report” for Q4 2014, audience tracker Nielsen shows that streaming video services are increasingly popularity. More than 40 percent of homes now have online subscription video on demand (SVOD) service from a company like Hulu, Amazon Prime, or Netflix. So why aren’t these two combined data sets a bigger worry for the pay TV industry? People Don’t Always Follow Through According to Clearvoice Research’s 2014 “TV Everywhere Market Profile,” 13 percent of those surveyed indicated they were likely to discontinue cable service. Of that group, 74 percent thought they’d do so within one year. Perhaps surprisingly, Baby Boomers indicated they were more likely to cut the cable than were MIllenials or Gen-Xers. Half a year after publishing the survey, though, Clearvoice says that only 22 percent of subscribers who said they’d probably cut cable have actually done so. So what’s stopping them? One possible hurdle is that the economics of cord cutting hasn’t necessarily played out as its fans had hoped. As we’ve previously reported, PlayStation’s Vue streaming service provides an alternative to cable or satellite, but not necessarily a cheaper one. Some streaming services still lack major channels and sports subscriptions that people want. Another possibility is that as more cable companies offer Internet service in addition to TV, the convenience or pricing of bundling the two services wins out over cutting the cord. Time Spent With Each Technology Additional information from Nielsen shows that regardless of the total number of subscribers, users spend far more time watching live TV than streaming video. In the final quarter of 2014, users watched an average of 149 hours and 14 minutes of live TV per month; in the same period, they spent only 10 hours and 29 minutes watching video online. Although year-over-year (YoY) data from 2013 shows that TV viewing time is down and streaming video time is up, TV still enjoys a greater than 14:1 advantage in total viewing time. Over time, though, that advantage could disappear. After breaking the above data up by users’ age, we can see that viewers over 65 years old have the highest TV:streaming time ratio, over 44:1. Young adults aged 18-24 have the lowest such ratio at just under 6:1. In other words, cord cutting might not be something that pay TV providers have to worry about much today, but if these current trends by younger viewers continue, cord cutting will become a serious problem for pay TV revenue. Change is Coming, But You’ll Have to Wait There’s no doubt that the Internet changed the way people listen to music. Given time, it will also change the way people watch video programming—it no longer feels appropriate to call these programs “TV.” However, it’s also possible that just as radio found a way to coexist with TV, TV will find a way to coexist with streaming video. One doesn’t necessarily have to die to make room for the other. How long will this fundamental change take? We don’t know, but here’s a bold prediction: it won’t happen this year. Of course, you may hear that same prediction next year as well. But it will happen eventually, and when it does, you’ll want to be ready for it. Make sure your Internet connection is fast enough for current and future streaming technologies now and you’ll find yourself ahead of the curve, rather than behind it. [zipfinder] Photo Credit: Guilherme Caldas/Flikr

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Will Smith is a copywriter living in Chattanooga, Tennessee. His favorite word is “petrichor,” and aside from wordplay, he loves reading history, watching Dodger baseball, and racing with the Sports Car Club of America.

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