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Wednesday, December 5, 2012

Cut the Cable Cord?

These days you hear an increasing amount of noise regarding people “cutting the cord.” It refers to individuals who have chosen to cancel their cable service or satellite provider usually to save money in a tight economy.

We have written about this phenomenon in this space in the past but there is a chance that it is picking up a bit of steam and is worth a re-visit. In recent months various estimates say that 400,000 households have cut the cord and, over the last year, 1.5 million have ceased to carry the pay TV option for premium channels.

There appears to be two groups of people out there. The first is strapped for cash and fed up. Here is a composite statement from several people who have told me that they have cut the cord in recent months: “I waste hours waiting for the cable guy if there is a problem and each year my bills goes up giving me new channels that I did not want and will never watch.”  Or “I can’t afford to spend $100-150 per month anymore.” A large group of men over the last two years have told me directly that the only reason that they keep cable or satellite is live sports.

The second group tends to be young, a bit stretched financially but not always, and very tech savvy.  They tell me that they get by with a mix of online options with the most prevalent blend being Netflix, Hulu (or Hulu Plus), Roku, and You Tube. Other than live sports, this blend can do an exemplary job of covering the video needs of millions. Some have told me that you cannot always see a series episode on the day that it airs but waiting a day or two to catch up is worth the savings that can be $60-80 per month. Tellingly, they are teaching their parents to do the same.

A handful of people have gone to very low-tech options that work for them but not for many. In the last year I have met two people at my local library as I searched for DVD’s of old British series. Both were elderly and living almost exclusively on Social Security payments. Neither has a TV anymore but they watch the free DVD’s that the library provides and get their fill of video in that way. Interestingly, both said they no longer get a daily newspaper and they get their news from NPR!

Foreign exchange students cross my path daily and they have an interesting spin on Americans and TV viewing. One said and I quote “you Americans are foolish. You spend way too much money on satellite and cable. I know sites all over the world where I can get free movies and programs. My fellow students are amazed as they know nothing about them.”  Another foreign student sheepishly told me that by the end of the semester he had become hooked on American football and now pays a small amount (a six pack of beer?) to spend each Sunday at a friend’s apartment to watch the NFL.  But he stubbornly insists that he will never pay for a cable or satellite subscription himself even if he permanently resides in the U.S.

These piecemeal solutions are not for everyone. Some people do not have the patience to troll the web for programming but so many have Netflix and Hulu that much of their viewing may be done on laptops anyway.  This is an area that all media analysts need to follow closely. A lot of well-educated and busy young adults in our largest cities have no interest in paying for TV. They can get a huge majority of their viewing needs covered by cobbling together some combination of Netflix, Hulu, et al.  One young man e-mailed me that you would be stunned at how many movie classics are available on You Tube. Check it out. He is not exaggerating.

All of this leads to a conclusion. Back in the mid-1990’s Sumner Redstone of Viacom made the famous statement that “content is king.” Well, if you are honest about the issue, it still is. With every passing year new devices and platforms emerge. Yet, we all want content. The content providers seem to be the one sure thing in our emerging world no matter what device or company is delivering it to you. Two giants stand out—Disney and Discovery.

The Disney name has been the bellwether for entertainment for the last few generations. Most people think of theme parks but they are huge content provider. They own seven movie studios, ABC and the grand jewel these days—ESPN. Talk to young men. A surprising number will tell you that the ONLY reason they keep cable is ESPN.

Discovery does not get the respect that it deserves. It has nine content filled networks in the US including Discovery, TLC, Animal Planet and the Military Channel. What few realize is the breathtaking scope of their global reach.  They have 150 distribution feeds in 40 languages! Discovery is truly a prince of content.

And, finally, have you noticed what Comcast, the cable giant did? They purchased majority ownership in NBC Universal. So no matter what happens, they have a lot more than a toehold in content going forward.

A few people with whom I correspond basically tell me that these outliers who do not have cable or satellite need to enjoy their savings while they can. The big boys like Verizon and Comcast are not going to give you Internet access at a low price much longer after you have cut the cable cord. They want to sell content and you are getting a lot at a reduced price if you cut the cord and use their Internet service to get content at a fire sale rate. That is certainly possible if cord cutting picks up a lot more steam.

No matter where we go in the next decade in terms of devices, keep you eye on the ball. Content is and will remain king.

If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com

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