Cord Cutting & OTT – Threat or Opportunity for Cable MSOs?
IMS Research tracks free-to-air and pay-TV subscribers in its Online Digital STB & iDTV Database, offering quarterly subscriber updates and five year forecasts for over 60 markets. Anna Maxbauer, senior analyst in charge of the database service, states, “Though I wouldn’t call the US cable platform’s recent performance a downward spiral, it’s possible the recent drops indicate a larger permanent change among consumers. I don’t think the cable operators will recover their pre-recession market share without a serious change to their offerings and prices.” She cautions, “The economic downtown continues to challenge consumers’ commitment to expensive services, however we cannot assume everyone that is giving up their pay-TV subscriptions right now is moving to paid or even free OTT services. We also expect that a share of consumers will come back to pay-TV at some point, especially as the economy improves.”
Compared with Netflix’s recently reported monthly ARPU of $12.19, US cable MSOs are not in a bad position. For example, Comcast reported a monthly ARPU of $133.43 for video customers in its Q4 2010 results. Anna Hunt, principal analyst and author of the upcoming report OTT Video Service - Delivery & Business Models, comments, “Consumers dropping their pay-TV service aren’t necessarily high-value cable customers. Many are likely basic customers looking for a lower-cost or free video entertainment option. Cable companies are seeing continual growth in services such as HD and DVR, and increasing on-demand consumption; video revenues are continuing to grow. As a response to growth in OTT offerings, pay-TV operators are aggressively expanding their on-demand portfolios, and incorporating their own OTT strategies with online content delivery, catch-up TV services, and support for portable devices, such as Time Warner Cable’s TV app for the iPad.”
Paul Erickson, senior analyst at IMS Research and author of the upcoming report on OTT Video – Hardware & Connectivity, states “There are still considerable tradeoffs in content availability when it comes to cutting the cord. People will continue to consume a mix of OTT and traditional pay-TV for a while to come. Current-day claims that OTT video is a significant cord-cutting threat seem overstated, and also fail to recognize that the pay-TV industry is already busy working on OTT delivery methods of their own.” Erickson adds, “It is not unrealistic that in the future, pay-TV operators’ content can be sufficiently secured and delivered to general CE devices on an OTT basis, resulting in increased demand for these connected devices. Future demand for OTT hardware will eventually be driven by the combined appeal of both traditional and non-traditional pay-TV services.”