March 16, 2009

Cord Cutting: No Cause for Alarm

There's a new term in the cable industry: cord cutting. Just a few months ago, this term might have conjured images of the birth of a first child. Now, it's official industry jargon, conveying the concern that cable customers might become so enamored of watching video online that they will "cut the cable cord" and cancel their subscriptions.

All this talk of cord cutting has given birth to industry research into online video viewing.

In late February, Leichtman Research Group reported that online video viewership is growing but isn't cause for panic in the cable world. The Diffusion Group said cable operator strategies to move content to multiple screens could increase profits.

The Leichtman research, based on a survey of 1,250 households nationwide, indicated that only 1 percent of adults view recent TV shows online daily, and 8 percent weekly - compared to 6 percent weekly last year.

Most video content being consumed online is not long-form video, said Bruce Leichtman, president and principal analyst of Leichtman Research Group. "The majority of it is not TV shows - it's sports clips, YouTube videos," he said. "Online is not the preferred location; it's an alternate location."

Leichtman cited a comScore report published in January 2009 that indicated the average viewing time for online video was only 3.1 minutes.

The profile of a high TV viewer is someone who's older and lower income, he said. The people viewing online video are younger and use more telecommunications devices.

Money on the table

Time Warner has announced an industry-wide initiative, dubbed "TV Everywhere," to put cable programming on the Web as a value-add for cable subscribers. Comcast already puts some of its programming on its Fancast site and plans to beef that up even more with its own initiative, "On Demand Online."

Research firm TDG, in a random sampling of 2,000 adult broadband users surveyed in January, indicated that 43 percent were interested in viewing their linear pay TV content on their PCs. Two-thirds of those (29 percent of total) were willing to pay at least $10 per month for the service. (For more, click here.)

The survey questions asked respondents if they would mind paying the extra $10 fee on their cable TV bill, said Michael Greeson, president of TDG.

"The question is to what extent are PCs becoming ancillary," said Greeson, who argued that cable companies should stop thinking of themselves as TV providers and start thinking of themselves as video providers to whatever screen the consumer wants.

As far as making online video a value-add for cable subscribers, Greeson said that leaves money on the table. "It's very difficult to give things away for free and then start to charge for them," he said. "This is something the music industry tried. There's a great deal of uncertainty about which model's going to work."

- Linda Hardesty

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