Blog: Has cord cutting been overhyped? - Mobile World Live

Blog: Has cord cutting been overhyped?

24 APR 2017

A host of services are available worldwide intended to make the most of cord cutting: the growing trend, especially among millennials, of giving up pay TV subscriptions in favour of online alternatives.

High-profile examples of this are AT&T’s DirecTV and YouTube’s app in the US – the latter enables users to access live TV channels from 50 networks including Fox and ESPN on their smartphones for $35 a month, which the firm hailed as being “less than half” the average price of cable services.

Such examples have got tongues wagging about a future where content will increasingly be created for, and consumed, via mobile.

The idea is users will no longer want to sit around flicking through channels until they find something they like. Video will be viewed on demand and on smartphones, dealing a major blow to traditional cable TV.

Following the early online video boom driven by YouTube, Netflix kickstarted the concept of OTT subscription video services. We already know it is doing phenomenally well: gross revenue from its iOS app grew 256 per cent year-on-year in Q1 2017 to hit $120 million, and in December 2016 it took the top grossing position on the US App Store for the first time.

In fact, Netflix CEO Reed Hastings predicted at Mobile World Congress (MWC) 2017 that all video in the next 10 to 20 years will be delivered via the internet (and there are many reports of operators rushing to make viewing video on smartphones a seamless and lag-free experience).

Consumer demand
Naturally the Netflix CEO will be a proponent of the trend, but do statistics support his prediction? Although cord cutting is on the rise, it is not as pervasive as some make it out to be.

In a survey of more than 2,000 US consumers, Deloitte said two-thirds of respondents reported they have kept their TV subscriptions. A major reason for this is because they’re bundled with their internet plan – in many markets, TV and broadband bundled together can be cheaper than getting either one or the other alone.

There is an argument the rise of unlimited mobile data plans will see users stop using fixed broadband, and hence cable subscriptions will dwindle. But at the moment mobile options have many limitations, such as reduced download speeds in congested areas.

Operators, also, have traditionally been lukewarm about such packages, often offering them to attract users and then adding caveats or withdrawing the service altogether.

The Deloitte survey found the percentage of US households subscribing to paid TV services has remained relatively stable since 2012, even as adoption of streaming services accelerated. The company found the percentage of consumers who pay for at least one streaming service climbed from 10 per cent in 2009 to 49 per cent in 2016.

Steve Miller-Jones, senior director of product management at Limelight Networks, which helps companies deliver digital content, told Mobile World Live the number of people who say they will never terminate a cable or pay-TV subscription rose from 10 per cent to 15 per cent since 2015.

To be fair, there are reports of the cord cutting trend gaining traction: according to research company The Diffusion Group, 9 per cent of the 85 million US homes with broadband connections came under the ‘cord nil’ category in 2011 – meaning they had minimal usage of traditional TV platforms. Today the figure stands at 22 per cent.

Meanwhile, a global Accenture survey found 13 per cent of respondents said they prefer watching TV shows on their smartphones, compared with 10 per cent last year.

While both signify an increase in cord cutting, it is still not the dominant option.

A major criticism of alternative services is they don’t cover a broad enough spectrum of channels. YouTube’s app, for instance, is missing major networks like Discovery, Turner and HBO.

This is a typical problem with OTT services: not everything is in one place. Users will only have access to certain networks depending on what service they choose to go with, rather than have everything in one place. This may mean they need to sign up to a cocktail of services.

It also means that the set-top box that is in every home with a cable service would have to replaced with, for instance, the Amazon Fire Stick, Apple TV, Chromecast, Roku or a combination of them.

This seems like a lot of trouble for the average consumer to go to.

So cable TV might not be becoming obsolete. It may be a case of old habits die hard, or just wanting something on in the background when doing other activities, including browsing the internet. Or, as often appears to be the case, it just comes with people’s internet package.

Jeremy Legg, CTO at Turner, probably explained it best when he told Mobile World Live: “We just don’t regard it as a binary choice that people will choose one over the other – they’re going to do both”.

While he doesn’t deny many are rethinking their cable TV subscription, he believes the vast majority still consume content on TV. For the average American family this is 30-plus hours a week.

What we do know for sure is broadcasters are switching to a mobile-first strategy. CNN’s parent Turner is one such example, with its The Bleacher Report product being mobile first from the beginning.

As CEO John Martin said at MWC: “CNN thought of themselves as a linear TV channel, website and then a little bit of mobile, but now they are rethinking their strategy and it will all be mobile-first.”

According to Martin, more than half of adults watch video-on-demand via mobile devices. With this figure expected to increase 50 per cent year-on-year, he believes mobile video “to be the fastest area of video growth.”

Martin also said Turner wants to be on as many platforms as possible, including Snapchat.

Limelight Networks’ Miller-Jones echoed these sentiments, stating traditional providers and delivery models are at risk of being left behind as consumers become more mobile savvy.

It is, of course, the younger population which is adopting this trend the most. Miller-Jones believes the availability of content is more important to millennials than price, and they are 7 per cent more likely to shift viewing to OTT content and cancel pay-TV subscriptions when they can subscribe to channels directly.

“If people do cut the cord, it is certainly not because of price. But mobility is a growing factor in choice of service and consumer demand for flexibility will only continue to grow,” he said.

Mark Zuckerberg recently highlighted the importance of augmented reality for markets including the TV. This will provide more disruption for the established media players.

But that’s probably a blog for another day.

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.


Saleha Riaz

Saleha joined Mobile World Live in October 2014 as a reporter and works across all e-newsletters - creating content, writing blogs and reports as well as conducting feature interviews...More

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