Cable and satellite TV subscription growth slowed down more than had been previously reported, and cord-cutting was a primary factor. But don’t worry about it — a revolution that will re-create the current multi-channel access paradigm is still a long way away. Those are the conclusions of research released Monday by Canadian research firm the Convergence Consulting Group.
According to the Convergence Consulting report, “The Battle for the North American Couch Potato: Bundling, TV, Internet,Telephone, Wireless,” 2.65 million Americans cut their cords between 2008-2011 and switched to over-the-top (OTT) services like Netflix to get their video programming. The report says that only 112,000 cable, satellite and telco TV service subscriptions were added in the U.S. last year — less than a third of the 380,000 added subscriptions that Leichtman Research Group reported last month while auditing only the top multi-channel programming services.
Regardless of whose number you use, the news isn’t great for the cable and satellite business, which from 2000-2009 added an average of around 2 million subscribers a year. Convergence Consulting believes migration of consumers to over-the-top services to is blame for this sudden drop-off and says the trend will only accelerate further in 2012. In fact, the firm projects the number of folks ditching their cable or satellite service in 2012 for OTT services to reach nearly 3.58 million.
Rather than sounding alarm bells, however, Convergence Consulting doesn’t believe these data points signal any kind of imminent threat to the multi-channel business.
“The revolution is not coming, at least not for a very long time,” Brahm Eiley, Toronto-based co-founder of the research group, told paidContent. He says that, as content providers (i.e. TV networks) continue to try to establish greater value for their movies and shows, they’ll continue to offer them through over-the-top distribution models. However, they won’t keep supplying their programming through these channels to a point at which serious degration of the traditional multi-channel access model occurs. In other words, if the cable and satellite business were to suddenly lose millions of subscribers rather than report narrow gains, Elley doesn’t believe the major entertainment conglomerates would be as eager to sign deals with Netflix and Hulu.
He points to the $38.5 billion spent on programming carriage and re-transmission fees in 2011 by multi-channel operators compared to the $3 billion on programming spent by Apple, Netflix and other OTT players.
“The leverage is clearly on the TV access side,” Elley said. “The content providers know where their bread is buttered.”
Republished with permission from paidContent, which writes about the transformation of the media-and-entertainment industries in the digital era, with a focus on emerging-business models and technologies.
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