Like Zombies.... They are the UN-cabled! And here's the scary part -- they are multiplying!
A Credit Suisse analyst this week projected that the multi-channel TV universe will fall by 200-thousand subscribers in 2012. They had previously forecast a GAIN of 250-thousand subs. The report said "the real challenge to the pay TV business model are behaviorally-driven cord-nevers.". Who are these phantoms? They are young. They are growing up watching online video. When asked to PAY for TV - the answer is often "WTF"!
Separately, comScore reported this week that online video watching hit a record 43 BILLION views in October. The average viewer consumed over 21 hours of video.
We've heard plenty of talk about "cord-cutting," which really means "cable TV cutting" because everyone still needs a broadband connection. But who's doing it?
I'd put the "cord-cutters" in three buckets:
- Cord-cutters - These are the REAL "cutters", they have had a cable box in their home for years and now have had it. Or they've found better alternatives. This number is still small. MSO execs have rightly diminished the impact this group has on their bottom lines!
- Cord-shavers - This group is downgrading service. They are canceling premium channels or getting a more basic service plan. It's been hard to find any publicly available numbers on this category.
- Cord-nevers - This is the most troubling group for the traditional operators. They are graduating college, leaving the nest and have become comfortable finding their viewing choices online. They don't recognize networks - they know "shows." They like on-demand viewing. They like skipping commercials, too!
If you have a better name for this group than "cord-nevers" - please speak up! "cord-zeros"? "cord-less"? "cord-wtf"?
The Credit Suisse report also states that "other than content rights protection and content cost growth, we view the generational culture shift surrounding video consumption as the biggest challenge pay TV will face over the next ten years."
This point is really important! This is not a blip. This is the new paradigm for the next generation.
In some ways it mirrors the generational shift when this age group stopped acquiring land line phones. Remember the term POTS? Stands for Plain Old Telephone Service! Well, if you know the term you probably still have cable. The landline phone business is in rapid decline. You probably won't leave home without your mobile phone. If you have a landline phone, it's probably still connected to your fax machine.
I predict that a true OTT (over the top) player will emerge in the next twelve months. This service will offer 40-50 live TV channels, a rich VOD offering, cloud DVR functionality and portability. Portability is key. A service that will truly live on your iPad or smartphone and not be tethered to a cable box in your home.
Clearly, we are seeing a changing dynamic in video consumption. This will play out over the next few years. There is clear opportunity for smart entrepreneurs and there are also major threats to the current incumbents. Thoughts?
