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The reality of “cord cutting” in North America
TMT Media Predictions 2013
Deloitte predicts that in 2013 almost all North American households that pay for TV through multichannel video programming distributors (MVPD) will continue to subscribe. Less than one percent of subscribers will discontinue their pay TV subscription (also known as ‘cord cutting’). That small number of cord cutters will likely be driven by a mix of: macroeconomic conditions, a perceived lack of value of pay TV, growth in over-the-top (OTT) video services and changing TV consumption habits.
A note from the authors
In North America the categories of live spectator sports, news, reality TV, first run drama, and comedy constitute the ‘four pillars’ of pay TV and are generally not available through third-party OTT alternatives. The proportion of households in North America with at least one family member willing to pay for TV sports is estimated to be more than 80 percent1. Further, those who don’t watch a lot of sports tend to watch a lot of reality, news and first-run comedy and drama. Few households watch none of the categories. 2013, given the exclusive content ownership by MVPD and BDU distributors of the four pillars, a maximum of ten percent of North American households would contemplate cancelling pay TV, and still be able to watch the shows they really want to watch. That is not zero, but neither is it as large a pool of potential cord cutters as most articles speculate.
The growth in OTT providers has benefitted content creators: OTT has been a new bidder for content rights, enhancing the value of that content. Given the very small numbers of cord cutters and cord nevers who are substituting OTT for pay TV, it seems likely that the vast majority of money made from selling content will come from the traditional broadcasters and distributors. OTT is a delightful incremental source of revenue, but unlikely to be in the same league. Read the report to explore more.
While cord cutting surveys may generate headlines, pay TV operators should probably be more focused on the 99 percent of their customers who are likely to stay, and look to increase average spend and design packages to please them, rather than attempting to appease the small but vocal group of subscribers who threaten to cancel. Listen as the TMT Predictions 2013 co-authors discuss highlights from this media sector prediction.
Duncan Stewart, Director of TMT Research, Deloitte Canada, and co-author of TMT Predictions.
Paul Lee, Head of Global TMT Research, co-author of TMT Predictions.
Stephen Heasley, Global Online Communications, Deloitte Touche Tohmatsu Limited