A couple glaring things about these statistics stands out to me. The first is that cord cutting is not a hot trend that the market is going to be taking by storm. It actually seems more like people are finding alternative ways to use technology. AT&T and Verizon have this enormous fiber backbone across the nation that they've been able to utilize. Consumers seem to have become more savvy to the idea of no delay channel changing, room-to-room watching, and other services that make these subscription TV services very desirable. The value that comes with these services is tremendous, and consumers seem to be reacting very favorably to this. A streaming service like Aereo or Hulu or Netflix is still seen by the vast majority of the market as a supplement to their regular service. It is more an ability to watch a wide variety of different content channels while knowing that the stream won't lag or pause unexpectedly. They're able to have more control over their viewing experience. Streaming is nice in concept, but at this point, that market is trying to validate their proof of concept right now.
The next thing that jumps out at me is the bundling of these products and services. With Fios and U-Verse, you're able to get high speed internet and TV over a reliable fiber backbone. I attended a talk in 2010 with AT&T's COO, John Stankey and he spoke about the necessity to make AT&T products and services "sticky". Essentially, he was talking about making the switching costs for customers too high. AT&T and Verizon are unique players in the pay-TV industry because they both have immense amounts of capital as well as the infrastructure to maintain their growth. Customers can bundle their wireless and wireline services together into one provider. Tiered spending discounts and promotions are given to customers who have all of these services combined together. One of the drawbacks to this is that AT&T and Verizon are relatively new players in this market and in order to build their business, they need to build out their fiber optic backbone. Currently, AT&T and Verizon are segmented into which territories they control and can bring their service to. It is very much a predetermined split share of market. Without the infrastructure, customers can't enjoy these services. Satellite TV services like DirecTV and Dish Network can bring their service to any household because their services are portable.Either way, the internet and TV have been fused together in many cases as AT&T and Verizon are proving right now. So much so that Intel and Sony are rumored to be starting their own TV service. Early rumors were that it would be an a-la carte menu where you paid for only the channels that you chose, but that is not the direction they are moving. Very early rumors about these two company's plans have been reported, but it is sure to integrate the internet capable TVs with a real TV service. They would be confined to regular content, but with some other features. This news clip outlines the rumors.
Cutting the cord on pay-TV services is more of a hope than an actual trend at this point. We would have started to see major market movement on streaming TV services and a decline in net subscriber growth in pay-TV services by now. Since it isn't happening yet, we can only assume that consumers have yet to prefer the streaming services. Streaming, at this point, is simply a content access medium while pay-TV services have a wide variety of services and features that appeal to consumers. Unless that gap is closed substantially, we're going to be tied to our cable boxes and satellites from our rooftops.
Shawn
Sources:
http://www.tvpredictions.com/numbers042513.htm
http://www.forbes.com/profile/john-stankey/
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