Memo to Cable Cos: Cord Cutters Aren’t The Issue

As Todd Spangler points out over at Multichannel News, it seems the press has caught cord-cutter fever. Reading this Washington Post piece, you’d think we’ve entered some sort of Pay-TV apocalypse in which robots battle hipster armies who consume all their video entertainment on Macs, at least when they’re not making music videos.

Others are more skeptical. Analyst Bruce Leichman believes the idea of cord-cutting is a result of mother-in-law research, and any serious analysis would show that its only a tiny fraction of users that have actually cut the cord. Regardless of who’s right, cord-cutting is a red herring. Because the number of cord-cutters will remain small and most will retain some form of pay-TV service, the bigger concern for incumbents is consumers who over time choose to consume more video entertainment from over-the-top sources like Hulu and less from Comcast. It’s these folks — and not the all-or-nothing cord-cutters — who will be the biggest percentage of consumers in a few years.

So what should incumbents do about it?  Quite simply, they should embrace it.  Ask any analyst and they’ll tell you triangulated data — meaning data that is reinforced by various factors — is more valuable than isolated information. With a multi-platform video customer — that is, a viewer of pay-TV, online, and perhaps even mobile video — an operator has more ways to understand the consumer.

In other words, if all your data told you was your customer watched American Idol on broadcast TV but didn’t tell you the same customer watched Meet The Press online, you’d have a much different — and less accurate — consumer profile.

While carriers realize the value of owning the consumer, their view is largely one-dimensional, usually filtered through a prism of bundled-services and resulting ARPU. If they start to think of multiplatform video consumption as a way to better understand the consumer, this will result, in the long term, in a higher marginal return on each consumer through more targeted advertising.

Google understands this; its efforts to own the consumer’s web activity (and to profile that behavior) aim to make the customer more valuable to them and their advertisers. The result, if we can get past the Big Brother and potential privacy aspects, is more targeted advertising as well as unified information and web services for the consumer.

If pay-TV operators take the same approach by embracing the consumer through whatever platform he chooses, they will know them better, and be better off — as will their ad partners.

Question of the week

Do you think cord-cutting will be as significant a problem for pay-TV operators as it has been for fixed-line voice operators?
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Michael Wolf

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7 Comments Subscribers to comment
  1. Michael Wolf Friday, May 29, 2009

    Robert – it is very early days, and I agree, much more could be done to enrich the usage of video online rather than just re-purpose broadcast, and it seems we are only very slow strides in that direction. I do think the interactive nature of online well-merged with video on a bigger display could create new creative opportunities for programmers.

    On metrics – the problem is getting to an understanding you describe will require in-depth observation of (as opposed to electronically monitoring) behavior and I don’t know if the initiatives under way to better gather user behavior will tease out the information you are describing. But, you are right – we need to get at a better understanding of how consumer’s use information and how their behavior is impacted by this info.

  2. Robert Bole Friday, May 29, 2009

    One of the challenges for the multi-platform programmer is that much of online content is structured on interacting around the television content. There is a lack of creativity around respecting the how online/mobile media shapes creative content, deepens the experience around the core concepts of the content or create “original value”, rather than just add value. It seems to all be about “let’s gossip” or share. I am more interested in the content vertical and how you layer the creative across the platforms and even building various related programming.

    Which leads me to my last point: metrics. We have a inadequate metric system to measure viewer behavior in terms of impact of the programming. The focus is too much on TV-based “winners & losers”, rather than the iterative understanding of how people incorporate the information into their lives, how they make decisions, etc.

  3. ^^^With regard to pay TV providers embracing multi-platform video delivery, they’re smarter in a lot of cases than we typically give them credit for.^^^ Example: making content available online to subscribers as Comcast and Time Warner plan to do this year. Unfortunately, there are enough competing interests (and yes, greedy and short-sighted people) inside every operator to muck up the works regularly and delay progress. That plus the technical and legal challenges of authentication, licensing agreements, portability, etc. make it difficult for operators to move as quickly as they need to. This should be a slam dunk for them. They not only have the video pipe into the home, but the data pipe as well. And they have systems in place to deal with content providers and advertisers. It should be a slam dunk. But of course it won’t happen that way. It will end up being messy, protracted, and probably fascinating to watch.

    Side note- I loved Dan Frommer’s recent post on this topic:

    1. Mari – you are right – they have all the weapons in the arsenal, and its really a complicated issue with issues like release windows, distribution rights, etc making things more difficult. Thanks for the link to the Frommer piece. What he’s pointing to sounds a little like how Europe is playing out right now with alot of consumers choosing Freeview hybrid set tops that can get extra channels via OTT.

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