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Dismissing the cord-cutter myth

TechCrunch TechCrunch 13/05/2016 Scott Ferber

When cable TV subscriptions in the U.S. peaked in 2012 — and 97.6 million Americans paid to watch television delivered via cable — it seemed the traditional media supply chain was stronger than ever. Since then, however, cable subscriptions have steadily declined each year.

The usual culprits blamed for this decline are the streaming services, like Netflix, Hulu, Amazon Prime, and HBO Go. A recent report from MoffettNathanson Research found that 81 percent of adults under 35 have a Netflix subscription. Additionally, millions of Americans are watching television from their smartphones or other handheld smart devices, which makes app-based services convenient choices.

The story goes, “Cord-cutters are canceling their cable services and going over-the-top, therefore it’s the demise of the television business as we know it.”

This premise is wrong. Here’s why: The consumer has their own definition of TV.

To start, we should clarify that consumers now perceive “TV” as content, not as content delivered through a linear hardware box in their living room. HBO, Netflix, Amazon, Hulu, Buzzfeed — consumers don’t care about where content derives, they only care that it’s quality.

A rise in streaming services doesn’t equal a loss of cable subscribers

While 1.2 million Americans have “cut the cord” (consumers ditching their cable bill for online streaming services) in the past four years, that number only accounts for about 1 percent of cable subscribers — hardly the mass exodus that marks the end of paid television.

It’s true that while cable subscriptions are declining at an increasing rate, it’s not a big enough issue to deem it the end of paid TV. Craig Moffett, veteran senior analyst at MoffettNathanson, describes the pace of cord-cutting as “drip, drip, drip,” meaning it’s too miniscule to matter.

Nonetheless, the fact that it’s happening still manages to get a lot of media attention. What the trend really shows, Moffett argues, is that rising streaming services don’t equate to a loss of cable subscribers. Instead, the meteoric rise of streaming subscribers exists in tandem with existing cable subscribers.

Consumers simply want to access content they love, as easily and affordably as possible.

The growth of online streaming services has steadily increased year after year since 2011, and not by insignificant single-digit percentages. U.S. Netflix subscriptions nearly doubled, from 25 million in 2012 to 44.74 million by Q4 2015. Even Hulu has grown from 6 million users in 2014 to 9 million (as of August 2015), with 37 percent of millennials reportedly subscribing to the service.

That’s a lot of eyeballs, but combined, the two giants of streaming media are only about half the total of cable subscribers, even after the losses from 2012 onward. And that’s the point; streaming services have not significantly subtracted from cable subscriptions. They’ve merely added to the market share.

In 2012, roughly 127.6 million Americans paid for television, or TV-like content:

  • Cable/satellite: 97.6 million
  • Netflix: 27 million
  • Hulu: 3 million

Compare that to the 150+ million Americans paying for television, or TV-like content, in 2016:

  • Cable/satellite: 96.5 million
  • Netflix: 44.74
  • Hulu: 9 million

If you add the 54 million U.S. Amazon Prime members — who have exclusive access to streaming Amazon Prime Video content — the number of paid media subscribers tops 200 million — nearly double what it was just four years ago.

TV providers aren’t going anywhere — they’re just evolving

To my previous point, I don’t believe consumers have brand allegiance to a certain provider of content — they simply want to access content they love, as easily and affordably as possible.

With that in mind, traditional cable and satellite companies, as well as traditional media companies, are evolving at a rapid pace. Consider these examples:

HBO, Comcast, NBC and others have launched TV-everywhere capabilities, allowing viewing of TV content across devices:

  • Dish launched SlingTV, giving customers access to unbundled channels for a monthly fee, with no contract.
  • Facebook and Twitter are in discussions to license TV network content for social media streaming.
  • AT&T acquired DirecTV, highlighting the importance of a digital footprint for TV content delivery.

What does this mean for advertisers?

While these blurred lines have created a lot of chaos in the industry, as the dust settles, these changes are resulting in new opportunities for marketers.

The shift to cross-screen consumption, as well as the rise of a new set of online competitors like Facebook and Google, has forced the hands of media companies, including broadcasters, cable companies and satellite providers to embrace solutions that begin to merge data, content and technology to remain competitive in today’s media marketplace.

NBCU, AT&T and FOX all recently announced programmatic TV offerings, which bring the technological ease of buying digital video to the traditional TV screen. With AT&T’s acquisition of DirecTV, the merged company now has more than 26 million households available for delivering ads programmatically in linear TV advertising.

For advertisers, this is opening up a new world of more targeted advertising, which may include not just television in its traditional form, but also television viewed on computers, mobile devices and via apps on devices connected to the television set. Using data to connect usage across devices allows advertisers to reach unduplicated audiences to provide incremental reach in a world of fragmented viewership.

The bottom line

Exactly how the future of media distribution and content will play out is still evolving, with new trends and technologies emerging every year. What we do know is that as of 2016, Americans’ interest in television and the number of them paying to watch content has never been higher — and it’s still on the rise.

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