Shaving The Cord; DVRs Continue Climb Says Magna

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July 11, 2011 – 12:03 am

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Shaving, Not Cutting

The hype about “cord-cutting” has been giving way to a more nuanced view – a more realistic view, if you will, about how the ubiquity of video across digital devices is affecting consumers’ decisions about their cable subscriptions.

eMarketer estimates that 158.1 million US internet users will download or stream video at least monthly via any device in 2011 – that’s roughly 68.2 percent of web users. By 2015, 76 percent of the internet population will be participating in this trend.

But as eMarketer analyst Lisa E. Phillips makes clear: this doesn’t mean they will be cutting the cord on their pay-TV service. Yes, if you ask anyone if they would like to cut the expensive monthly cable subscription in favor of relying on cheaper broadband connections to provide viewing pleasure, most consumers would say sure. In actuality, few households are actually making that leap.

That’s not to say it’s all talk either. Phillips points to “cord shaving – downgrading an existing level of service – seems to be gathering some steam. And some young adults may never sign up for cable or satellite service when they leave their parents’ household, she guesses.

Right now, you really can’t keep up with most current season shows without paying something for it, whether it’s downloading on iTunes or subscribing to Hulu. But as time-shifted viewing becomes the norm, cable companies have been smart to embrace the TV Everywhere model that lets current subs watch selected programming on their portable devices. But it’s a stop-gap measure. The future is a lot cheaper and more connected. Cable companies have to adjust their subscription levels, as the days of simply accepting $150 per month of service is starting to fade.

Cable Video Rebirth?

As economically-depressed consumers shift to “cord-shaving” (see above), the cable companies that are able to offer more ways to view video – and at a cheaper cost – will be the winners. Comcast, the dominant cable operator, is  as well-positioned to take advantage of the changing attitudes and spur what Bernstein Research analyst Craig Moffett calls a “cable video renaissance.”

In a research note (sub. req.), Moffett suggests that Comcast’s IP-based online video service Xcalibur, along with its “industry-leading” VOD selection, mark an important milestone. “For the first time in twenty years, it is not a satellite operator, but instead a cable company – Comcast – that now appears to offer the best overall video experience in the Pay TV industry,” Moffett raves.

Even if you don’t agree with Moffett’s view – really, Xcalibur is a pretty good Google TV killer, but nothing that innovative – it does point the industry to the right direction. And the advantages this kind of offering gives Comcast will be apparent over the next year.

Bernstein expects Comcast to lose about 283,000 subscribers this year, less than half of last year's 757,000 drop. Within the next two years, Comcast  break even in video subscribers. As Moffett says, that would be quite a positive reversal, considering that video is generally considered cable's weakest link.

VOD For Most

One of the things working leveling the playing field between cable companies and over-the-top services like Netflix, Roku and Boxee as the appetite for video consumption grows is the penetration of VOD. It’s unlikely that entertainment companies will alter the windowing release process dramatically over the next few years, so when it comes to controlling when you get to watch a show, the DVR is cable’s ace-in-the-hole.

In its quarterly On-Demand outlook, MagnaGlobal says that the number of household with digital video recorders will reach 63.1 million in 2016, up from 40.5 million at the end of the first quarter of 2011. Magna says DVRs will be in 51.3% of TV households in 2016, versus 34.7 percent at the end of the first quarter.

Overall, VOD households will hit 71 million, or 57.7 percent of TV households by 2016, a 45.6 percent rise from 53.3 million at the end of the first quarter, Magna says.

By the end of 2011, there will be 87,000 households totally reliant on OTT for their media consumption – hardly a blip. But in five years, that number will be 8.4 million.

Live Still Lives

One could infer from MagnaGlobal’s report that “live” viewing is likely to be less and less important to consumers in the next five years most of us get used to navigating the connected home and the greater promise of on-demand viewing. But traditional operators in the TV business can console themselves for the moment with a study from online researcher Knowledge Networks, which says that almost half (47 percent) say that watching a program at its regular time is their first choice – with DVR usage coming in second at 23 percent.

Waiting for the video to “buffer” and poor viewing quality are the chief problems of OTT services. Part of the problem for OTT companies is that their products are directly dependent on the strength of wifi networks – and for consumers, that generally means cable company ISPs. Can OTT companies morph into ISPs? That sounds unlikely at this point. But if a few dominate the space, they’ll be able to have the wherewithal to enhance router technology or at least have enough muscle to push ISPs toward improving signals. But here is one area where cable companies can maintain their hold on viewers – but offering better broadband access. Read the release here or buy the full report here. Also, Mediapost’s Wayne Friedman has a pretty good take on why viewers still aren’t ready for an OTT world – yet.

Tweet-Shifted Ratings

With all the growth of time-shifted viewing, you would think that traditional TV players would be eager to catch on and sync all viewing together. Bill Wise, the head of TV analytics company Mediabank, has some hopes. But he’s mostly pretty doubtful, considering the entrenched interests that depend on the status quo Yes, there are efforts by Nielsen and others, but there’s so much new ground to cover that seems beyond what anyone appears capable of capturing, let alone understanding.

Writing on the Mediapost blog Online Metrics Insider, Wise takes a look at CBS’ “Tweet Week,” an April event that saw the network attract 50,000 new Twitter followers. While CBS bean counters can tell you that, they can’t say whether or not it moved the ratings needle.

Part of the problem is technological, but mostly, it’s organizational: the online and offline divisions are largely siloed at the networks. That hampers any desire at connecting those two ends, whereas a programs fans are already geared to look further online when something offline interests them – and vice versa. “It might mean we're headed toward a future where one half of the media world just doesn't know what the other half is doing,” Wise says. “In an era of ever-increasing connections between the touchpoints, that's untenable.”

But Wait. There’s More!

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July 11, 2011 – 12:03 am

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