Cable may still be king of media delivery, but the kingdom's subjects couldn't be more miserable, a new report shows. And while pay-TV subscribers hunt for an alternative to their current subscriptions, the number of over-the-top households continues to grow, another study found.
The Consumer Electronics Association released a report this week showing that the percentage of cord cutters and cord nevers who rely solely on over-the-top solutions to get their entertainment is growing, and is preparing to overtake the percentage of people who rely on over-the-air antennas. The percentages are small: just 6 percent of U.S. households still rely on OTA (down from more than half the country back in 1986), while 5 percent are all-OTT.
In 93 percent of all-OTT households, the television is still the primary viewing device, reflecting the TV set's near-ubiquitous penetration among all households--97 percent, the CEA report said.
The small percentage of OTT households would seem to lend support to Time Warner CEO Jeff Bewkes' snarky statements about cord cutters. Two weeks ago he told investors about millennials, "Once they take the mattress and get it off the floor, that's when they subscribe to TV."
However, additional information from the CEA report doesn't track with his comments: Last year, nearly 46 percent of all TV households watched video on a laptop, notebook or netbook, and 43 percent viewed videos on a smartphone. That's up from 38 percent and 33 percent, respectively, in 2013. And almost half of all U.S. TV households watched at least some programs over the Internet in the past year--growing from 28 percent in 2013 to 45 percent this year.
And, give or take a few key business decisions and one pending Supreme Court ruling (in the case of Aereo vs. broadcasters), the OTT landscape is poised to change even faster.
Pay-TV subscribers are unhappier than they have ever been: 73 percent of respondents to a cg42 online survey said they felt cable companies were predatory and were taking advantage of consumers' lack of choice for pay-TV providers. And 53 percent of those surveyed for the report said they would leave their current cable company if they actually had a choice.
cg42 surveyed 3,038 current and former customers of the top five U.S. cable companies--Comcast, Time Warner Cable, Cox Communications, Charter Communications and Cablevision--in April 2014. Based on their responses, the market research firm rated each company by its "brand vulnerability," or how much they stood to lose if those dissatisfied customers jump ship.
Granted, it's unknown how many of those 53 percent would opt for all-OTT. Longtime pay-TV subscribers may be reluctant to depart from a traditional subscription model.
It looks like a critical period for cable and satellite MSOs. And despite Bewkes' skepticism about the growth and buying power of cord cutters, he has also urged pay-TV providers for the last couple of years to buy a stake in the OTT game.
"What's powerful about it--by authenticating TV Everywhere with whatever network you like, on all devices and platforms, cable operators would be making the video subscription they sell to consumers even more valuable," he told investors on an earnings call in 2012. "They would therefore make it much less likely that a consumer would cut the cord."
Even though pay-TV providers have increased their TV Everywhere availability, most still haven't fully committed to the OTT model. Dish Network is still in the talking-about phase of a limited OTT version of its cable service with 20 or 30 channels, but other operators are sticking to the linear-first mentality.
Meantime, consumers appear to be at the end of their rope with pay TV. A BroadbandTVcon panel last week said that consumers "have reached their limits" on pricing. And while pay-TV providers have some distinct advantages over OTT, they could ultimately give up that advantage, according to Jonathan Hurd, director at Altman Vilandrie & Company.
|Consumer frustration with pay TV providers is at an all-time high, and over half would leave if they could. Cable's brand vulnerability is "50-70% higher than other industries." (Source: cg42 Brand Vulnerability Study)|
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