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Cable Is Alive and Well, Thank You

By: Paul Rodriquez, Cable Tech Talk

Maybe because it was drawing towards the close of August when the news seems to move more slowly, but last week was quite busy for stories questioning the very existence of the cable’s video service. This is always a ripe topic for conversation but it’s worth taking a deeper look at some of last week’s stories to show that video is holding its own.

The week started off Monday morning with this article – “In the Living Room, Hooked on Pay TV” – by Matt Richtel and Brian Stelter in the New York Times.

The proliferation of Internet video has led to much talk of “cord-cutting” — a term that has come to mean canceling traditional pay TV and replacing it with programming from a grab bag of online sources.

But so far Americans are not doing this in any meaningful numbers. “Nor is there any evidence of it emerging in the near future,” said Bruce Leichtman, the president of Leichtman Research Group, which studies consumer media habits.

Good news for cable. But the next day, SNL Kagan reported that the 2Q numbers for paid TV subscriptions fell for the first time ever. Kagan attributes the downturn to the weak housing market and high unemployment (plus the loss of customers who had initially signed up during the DTV transition).

NewTeeVee reported this as “New Numbers Reveal: Cord Cutting Is Real,” despite including cautionary quotes from SNL Kagan analyst Mariam Rondeli. Then, NewTeeVee’s Ryan Lawler claimed “The Future of TV Is Not on Cable.” (There was also this disappointing NPR story.)

It’s important to look at these numbers in context:

  • Second quarter subscriptions dip every year, as students go home from school and “snow birds” close up their winter homes.
  • The Multichannel Video Programming Distributor (MVPD) market is quite mature and penetration is high. Most households that want multichannel video service have already subscribed.
  • Some former over-the-air households, who had long held out on getting cable, took advantage of deals offered during the DTV transition of 2009 to become multichannel customers, but as those deals expired, they’ve cancelled. While looking like a group of disconnects, it’s more representative of people that resisted such services before and are now going back to their old ways.
  • Total housing units were essentially stagnant for the previous five quarters (from Dec. ‘08 to March ‘10). Even so, over the last six quarters, the number of MVPD subscription additions (+2.1 million) have outpaced additions to housing units (+0.3 million) by 6.5 times. But a weak economy is having an effect. Even Karl Bode, in a post that said “Cord Cutters Are Very Real,” admitted that “it’s being driven primarily by the economy.”

A Merrill Lynch report on the 2Q numbers pointed out that the Netflix platform is growing (available on Xbox 360, PS3, Wii, and many Blu-ray players) and Hulu engagement is now up to 2.6 hours, but that Nielsen says that “American [households] are watching more TV than ever before,” up to eight hours a day (with that figure rising each year).

As if to put the icing on the cake, Wednesday brought a Bloomberg story that reported that Apple was looking to introduce 99-cent rentals of television shows. Some interpreted this as a threat to cable and the advent of true “à la carte.”

Jason Perlow at ZDNet ran some numbers to see if such a “pay as you go” approach makes financial sense (also see the analysis at GigaOM).

Previously, TechnoBuffalo noted that 99-cent rentals might not make much sense; last week, they pointed out that $40 per month for 70+ channels comes to less than $1 per channel.

So now Apple wants to charge you $1 per episode of any particular show?  Remember it’s a rental and if Bloomberg is correct, it’s only yours for 48 hours.  Pff.

Joe Flint notes some other causes of skepticism, including the critical point that “content providers need to make sure that their eagerness to embrace the future doesn’t undercut the present because if it does, there won’t be a future to embrace.” Robert McGarvey at Internet Evolution also said it might be a little too early to declare Apple’s victory.

It’s worth pointing out that 2Q reports also showed that cable took all of the net adds for broadband service. You have to connect to the Internet to get that streaming video. And Joel Johnson at Gizmodo answered the question “Why Are You Still Subscribing to Cable Television?” with some pretty good reasons to not cut the cord. Plus, some have noted that in tough economic times, cable can provide great entertainment value.

We’ll continue to see consumer have more choices for ways to enjoy video content both in and out of the home. But it’s clear that cable’s video service is a viable choice for many.


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