A new report from Forrester Research predicts that by 2018, the portion of U.S. households with cable or satellite television will dip from its current penetration of 82% to 79%.
The report, titled “Marketers: Don’t Worry About Cord-Cutting,” interprets these statistics rather optimistically for the TV industry. It argues that the only people who are unsubscribing from cable services are those who don’t watch much television, anyway, and that these people are leaving not because their content needs are met exclusively online but because television is too expensive.
In short, Forrester’s Jim Nail calls reports of TV’s demise “overblown” and warns marketers not to be “distracted by exaggerated headlines about turmoil in the pay-TV industry…”
As the author of such posts as “Google’s $US100 Million Deal With Publicis Ought To Terrify TV Execs” and “Facebook And Google Are About To Overtake All Of TV In Audience Size, ” I feel a certain duty to play devil’s advocate here.
Here’s Nail’s prediction of the percentages of U.S. households that will subscribe to pay-TV services over the next five years. I don’t know that cable execs would consider a three-point decline a “win,” but it’s not the inevitable death Business Insider and other publications have been writing about:
Nail’s argument is that while there are lots of content available online, a great deal of popular, first-run TV content is unavailable to users without a cable or satellite subscription (or the login information of someone who has one). He also said that internet-enabled “smart” televisions, which allow people to watch Netflix and other internet content on their televisions, are currently too difficult for people to use to convince them to stop paying for cable.
To some extent, the report is absolutely correct. As of now, television networks have the rights to the vast majority of the content my friends and I want to watch, and they have done a good job protecting those rights such that if I want to watch a cable TV show in its current season, I either have to sign up for cable or buy a subscription to Hulu, which is owned by three of the four major broadcast networks.
But where Nail’s thesis is flawed is in assuming that broadcast and cable networks will forever have the best content. Already, Netflix’s investment in original content has borne fruit in the form of hit shows “House of Cards” and “Orange is the New Black,” and the democratization of the web has opened up YouTube to young and hungry content creators around the world.
And just as young people are getting used to watching all kinds of video content on YouTube, so too will they become comfortable operating smart TVs and watching internet video on TV screens via connected devices like Xbox or Chromecast.
Nail admits this last point later in his report, in a section that predicts the end of the cable bundling model that forces consumers to pay for all-the-time access to a whole slate of channels rather than one channel or program at a time. He writes:
Consumers perceive connecting a TV to the Internet as a mystery — or at least a hassle. The gap is smaller than they think, with 38 million households already using connected consoles and more than one-quarter of all new TVs shipped being “smart,” with built-in Internet connectivity.11 Microsoft’s advertising for its new Xbox One and Samsung’s TV campaign educating consumers about Smart TV features will shrink the perception down to size. Once consumers realise that Hulu and Netflix are one click away from AMC and NBC, viewing time spent with online sources will rapidly increase, and they will reach a break point of paying so much to watch fewer and fewer hours through their pay-TV provider. To prevent their customers from defecting entirely, pay-TV providers will shift to an à la carte channel selection model, allowing the hard-core sports fan to buy only ESPN, for example.
So, no, you are not about to wake up tomorrow in a world where nobody you know has cable. But alternative, internet-enabled content platforms will continue to proliferate, and their quality and ease of access will only improve from here.
Undeniably, small — but not insignificant — numbers of people have already decided they can live without cable. And while TV executives often point out that the average American watches more than 35 hours of television per week, that number is buoyed by senior citizens logging more than 45 hours, as the chart below from MarketingCharts.com shows.
As for the all-important 25-34 demographic? They’re watching a little more than 26 hours a week — down about 15% from just two and a half years ago.
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