Analysis for 'Convergence Consulting Group'
Friday, April 16, 2010, 10:06 AM ET|Posted by Will Richmond"Cord-cutting," the idea of disconnecting your cable/satellite/telco video subscription service in favor of online viewing only, got renewed attention this week as new research from a Canadian firm named Convergence Consulting Group said that 800,000 U.S. households have unplugged in the last 2 years. Though that number is a teeny-tiny fraction of the population that still takes subscription TV, the question begs, is this an early indicator of rampant cord-cutting to follow, or a blip that's unlikely to get that much bigger over time?
Back in the fall of '08 I asserted that for most people cord-cutting isn't going to be happening any time soon for 2 key reasons. First, that it's still relatively hard for most mainstream users to connect broadband to their TVs, which is an essential ingredient to long-form viewing. There's no question that this has gotten easier since, and will only get easier still. Eventually broadband to the TV will be ubiquitous. But until it is, cord-cutting raises technical and comfort challenges most people don't want to confront.
The bigger obstacle to cord-cutting is the loss of cable-only programming that isn't available for free online. Back in '08 the concept of TV Everywhere wasn't yet around. Now that it's beginning to rollout (albeit painfully slowly), it's evident that the cable ecosystem is determined to see cable programming remain accessible only to those who maintain a paid subscription.
My take is that cable programming is the key firewall against cord-cutting. For some, losing cable programs won't matter. But my guess is that for most, losing their favorite cable programs by cutting the cord will be a non-starter. As Conan's move this week to TBS illustrates, increasingly the most distinctive shows are on cable. And note the "firewall within the firewall" is marquee sports programming on channels like ESPN, TNT and Fox Sports, which isn't going online for free ever. This precludes virtually all true sports fans from cord-cutting.
Net-net, the debate about cord-cutting's potential needs to focus on how much value audiences place on their favorite cable programs. If it's a lot, then little cord-cutting will ensue; if it's a little - and there are suitable free online substitutes - then we'll see lots more cord-cutting.
(Note - all of this is fodder for our VideoSchmooze panel discussion on April 26th "Money Talks - Is Online Video Shifting to the Paid Model?" Early bird discounted registration expires today!)
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Companies: Convergence Consulting Group
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