Posts Tagged ‘Cord Nevers’

Cord-Cutting: A Slow And Steady Drip, Drip, Drip

An interesting study was just conducted by consulting firm cg42 and it claims that pay TV service providers stand to lose as much as $1 billion in revenue over the next 12 months. The reason? Cg42 says that as many as 800,000 customers are likely to ‘cut the cord’ in an attempt to save money on pay TV packages and bundles.

Cg42 surveyed 1,119 customers online this past summer and calculated that pay TV companies could lose as much as $1,248 per lost subscriber on an annual basis. In their survey, they found that the average pay TV subscriber spends about $187 per month for cable TV, phone, Internet access, and video streaming subscriptions.

In contrast, ‘cord nevers’ – people who have never subscribed to pay TV services – spend about $71 per month on broadband access and video streaming subscriptions. The streaming part of that amounts to as little as $15 per month.

Cg42’s survey revealed that both cord-cutters and cord-nevers don’t care much for traditional TV programming, and 83% of cord-cutters said they can access most or all of the content they want to watch without a pay TV subscription. (87% of cord-nevers said the same thing.)

Perhaps more ominous for companies like Comcast and Time Warner, the satisfaction of watching TV without paying for cable or satellite services increases the longer these viewers remain away from pay TV subscriptions.

The most popular streaming service is still Netflix, which 94% of respondents subscribe to.  And number 2? YouTube’s free video channels, which offer selected clips from late night talk shows and musical performances.

Surprisingly, many respondents get their sports fix by going to bars or restaurants to watch games. The survey didn’t mention how many people also watch sports on free over-the-air TV, which of course includes NFL games, selected baseball games and the World Series, the NHL playoffs, and the NBA playoffs, plus the Olympics, golf, tennis, and NASCAR/Indy Car racing.

Surveys like these aren’t anything new. We’ve seen analysts forecasting the end of traditional pay TV packages for several years now. However, there is a real concern about the cost of these monthly services, and whether they’re worth the price.

I’ve advised numerous folks on how to get free over-the-air television and supplement it with streaming services to save money – and in fact, later today, I’ll be visiting someone nearby to do an RF site survey and see how well he can receive the local Philadelphia stations at home (upward of 50 minor channels).

Couple that with broadband service and there’s no real reason to stay with pay TV, especially now that you can subscribe to HBO and Showtime online without a pay TV service.  You can also do without landline phone service if you have a mobile phone, further reducing your monthly expenditures.

I said this a few years ago in several columns: The future of cable TV is providing broadband service. Just like mobile phone companies charge you only for data (phone calls and messaging are basically free now), so will cable and satellite companies. They will look more like the electric company, charging you for however many gigabytes you used that month.

And how you use the data will be up to you: sending and receiving photos, streaming video, emails, and voice-over-IP. That’s the real future of Comcast, Time Warner, Charter, Bright House, and other MSOs. The question is, have they accepted it yet?

To Cut, Or Not To Cut: That Is The Question…

A recent report from Convergence Consulting Group states that by their estimates, 1.13 million TV households in the United States canceled pay TV services in 2015, which is about four times the pace of cancellations in 2014.

The report is somewhat humorously called “The Battle For The North America Couch Potato” and shows that even though pay TV subscription revenue increased by 3% in 2015 to $105B and is expected to tick up another 2% in 2016 to $107B, those percentages don’t match up to the rapid growth now being experienced with over-the-top (OTT) video services, like Netflix and Hulu.

Over the same time period, OTT subscription revenue increased by 29% to $5.1B in 2015, and is expected to grow another 20% this year to $6.1B. Now, that’s just 5.6% of the revenue forecast for conventional pay TV this year. But the growth rate of OTT is impressive and is mostly at the expense of conventional cable, fiber, and satellite TV subscriptions.

Convergence also reports that “cord never” and “cord cutter” households increased to 24.6M in 2015 from 22.5M in 2014. It’s expected that number will continue to increase to 26.7M households by the end of this year. (For some perspective, Comcast has a total of about 23 million broadband subscribers, which is more than their pay TV subscriber total.)

It’s no mystery why OTT continues to grow in popularity. Services like Netflix, Hulu, and Amazon Prime allow viewers to watch individual movies and episodes of TV shows on demand for reasonable prices, either as part of a mow monthly subscriber fee or an annual membership fee + small per-viewing charges.

In essence, what OTT viewers get is a la carte TV, instead of paying a hundred dollars or more for a service bundle that includes large blocks of TV channels that never get watched. (The average TV viewer watches about 17 different channels in a year.)  And the key to making that possible is ever-faster broadband speeds, which (perhaps ironically) are being offered by cable TV companies to hold off the likes of Verizon’s FiOS, DirecTV, and Dish.

The analogy is of someone providing you the rope with which they will be hung. As Internet speeds increase along with cable bills, the first thing to get dumped is the pay TV channels. With many families, they’ve also dropped landline service in favor of mobile phones, so there’s no need for a “triple play” package (or even a “double play,” which in baseball means you’re out!)

There aren’t enough studies on hand to show how many of those cutters have picked up on watching free, over-the-air (OTA) digital TV broadcasts. And there continues to be disputes between different advocacy groups as to how much of the population actually watches OTA TV: I’ve seen estimates as low as 5-6% and as high as 20%.

Now, the second part of the story: Vizio, a leading TV brand, is now shipping a line of SmartCast Ultra HDTVs that will be “tuner-free.” You read that right; these TVs won’t have an on-board ATSC tuner for OTA broadcasts. An extra tuner would be required, along with an HDMI connection and indoor or outdoor antenna.

Technically speaking, a “TV” sold in the United States MUST have an ATSC tuner built-in, according to the FCC mandate that set a final compliance deadline of March 1, 2007. However, there is no reason why a company can’t sell a “monitor” or “display,” which would not be required to contain such a tuner. (The original FCC mandate exempted monitors that did not include analog tuners from having a digital tuner.)

Don't bother buying an antenna for SmartCast TVs. There's no built-in tuner to use it with.

Don’t bother buying an antenna for SmartCast TVs. There’s no built-in tuner to use it with.

 

According to a story on the TechHive Web site, the changes will apply to all of Vizio’s 4K Ultra HD TVs with SmartCast, including the new P-Series and upcoming E- and M-Series sets. In the story, a Vizio representative was quoted as saying that the company’s own surveys showed that less than 10 percent of their customers watched OTA broadcasts, and that a CEA (now CTA) study in 2013 claimed that just 7% of U.S. households used antennas to watch TV.

That figure is obviously low by an order of magnitude. In the 3rd quarter of 2015, the research firm Nielsen found that 12.8 million U.S. homes were relying solely on OTA TV reception, up from 12.2 the year before, and that this number didn’t include homes that are combining antenna broadcasts and streaming. All told, the percentage of homes that use an indoor or outdoor antenna in some way to watch TV probably falls between 10% and 12% – and could be even higher.

So why would Vizio drop the tuner? There’s certainly a cost savings associated with it, and not just for the hardware – there are also royalties associated with the underlying technology. But given that you can buy an outboard ATSC tuner for as little as $40, it can’t be a huge cost savings.

What’s funny about Vizio’s approach is that retailers are offering more antennas and even offering streaming media players and antennas as bundles. I’ve even noticed that the offerings of indoor TV antennas have increased at the local Best Buy (outdoor antennas are still a tough sell; only us hard-core OTA viewers will take the time to install them).

It doesn’t appear any other TV brands are following suit. However, there is a fly in the ointment: ATSC 3.0, which as a completely new standard would require an outboard set-top box or perhaps a USB stick to work with existing TVs. That’s because it supports different transmission modes that are incompatible with current ATSC tuners.

Another wrinkle – there’s no timeline for adoption of version 3.0. Right now, we’re in the middle of the first wave of FCC channel auctions, meaning that the UHF TV spectrum may be somewhat truncated after all is said and done – and many stations will have to relocate. So moving to a new terrestrial broadcast standard won’t be a priority for broadcasters any time soon.