About nine percent of U.S. respondents to a Deloitte survey say they have stopped buying video entertainment subscriptions from cable, telco or satellite providers, while another 11 percent report they are considering doing so.
Perhaps the important finding is why people are considering doing so. The 11 percent who report they are considering abandoning subscription TV services say they now can watch almost all of their favorite shows online.
One would guess that, as typically is the case when product substitution occurs, that the first “switchers” are users for whom the existing solutions have low value, compared to product price.
The classic example is the person who doesn’t watch much television in the first place and does not have children or other family members who do enjoy television, making a $100 a month fee “high” in relationship to value.
In the case of the “typical end user,” video cord cutting seems to be more of a barrier than some might think. An Experiment In Cord Cutting Highly-motivated end users might put up with quite a lot of hassle to avoid buying video. For most, such efforts will be too much bother.
Under what conditions would a consumer be able to get rid of their multichannel video service and use alternate technologies?
The answer is more complicated than might first appear. Part of the answer requires knowing what functional substitutes actually exist for the types of content any single user actually wants to watch, when they want to watch, and how much that content is worth. What drives switching?
Only after that is determined does technology actually matter. It increasingly is easy to substitute a stand-alone digital video recorder for the same function provided by a multichannel video provider’s own set-top decoder, for example.
So consider the decision matrix for a user who cannot live without the convenience of a DVR. “Cutting the cord” might make sense for a user who only wants to watch what is available over the air, who can get decent signal reception, and knows how to use Netflix to watch movies.
That option will not work, even if a user wants to do so, if any of the essential programming is “cable only.” To use but one example, a user who demands Fox News or Fox Business must typically buy an “expanded basic” package just to get those one or two channels.
Neither is available on a streaming basis. If that consumer does not actually have to “see” the programming, but only “hear” it, the one available option is to buy Sirius XM service.
Alternatives slowly are growing, but you get the point: technology alternatives are viable only when the content one wishes to see actually is available through alternate channels.
The decision might be a lot easier if a user’s favorites are those TV series available on Hulu, for example.
But there again, the “when I want to watch” issue has to be considered. Hulu content will typically be time delayed by 24 hours. If a user really views some show as an “appointment,” that 24 hours can be a long time.
Nor will content owners be in a huge rush to make alternate viewing to easy. Content companies make $30 billion a year licensing content to cable, satellite and telco video providers. They aren’t dumb.
Content owners are not going to make it too attractive to watch that licensed content if it means damaging the existing $30 billion revenue stream.
The point is that technology increasingly is available to create alternate channels and viewing formats. But technology is not sufficient to cause robust alternate channels to develop. What must happen is willingness by content owners to license their content in new ways, for delivery using different channels.
As recently as 2009, only 28 percent of Americans reported streaming a movie; today, 42 percent report streaming.
The number of people citing streaming delivery of a movie to their computer or television as their favorite way of watching a movie rose to 14 percent from 4 percent in 2009.
Also, in 2007, 37 percent of people said that they had not viewed a movie, available for purchase or rental, during the past six months. In 2011, that percentage of non-consumers dropped to only 19 percent.
The Deloitte survey assessed media consumption preferences of nearly 2,000 consumers, ages 14 to 75 years old in the United States.