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Cord Cutting Myth and Fact


As internet video streaming services become more popular, some people say the conventional pay TV industry is doomed. Are they right?

With our first glance at the data, it may seem they are. Cable TV subscriptions peaked in 2012, and have declined every year since then. Streaming platforms such as Hulu, Netflix,and Amazon Prime Video are steadily picking up more subscribers, and more than 80% of adults under 35 have Netflix subscriptions. Millions of Americans are watching videos from smart phones, tablets, and other mobile devices, instead of wired home TV sets.  It would seem that the TV business, as we know it, is headed for oblivion.

The data, though, may be misleading. About 1.2 million Americans have ‘cut the cord” in the last four years. In other words, they have abandoned cable or satellite TV in favor of online streaming services. But this is only about 1% of all TV subscriptions. It isn’t the stampede that’s been trumpeted in the press, and it certainly doesn’t portend the demise of the TV business. Craig Moffett, a senior analyst for MoffettNathanson, a research firm specializing in communications industries, says the competitive threat of cord cutting has been wildly exaggerated. The increased use of streaming services, he says, won’t mean the end of conventional TV businesses. The skyrocketing customer base for streaming services been accompanied by an evolution in existing subscription TV. With a slightly smaller customer base, subscription TV is more profitable, with more customers opting for high-value premium movie and sports packages.

Cord cutting has not altered the basic nature of the TV business. It is curated video content. Consumers don’t care much if they receive it through hardware boxes in their living rooms, or over the internet. They care only about its quality, and their ability to watch it when they want to. They don’t want to be limited by network broadcast schedules.

Most cable and satellite TV providers have adapted to consumer demands. Most of their receivers will handle time-shifting functions with most content, and customers can stream their content to mobile devices.

Some cable and satellite system operators are invading the turf now held by Netflix and Hulu. Last year, Dish Network launched Sling TV, a multi-channel TV service that doesn’t require a satellite dish or set-top box. It doesn’t require contracts or long-term commitments. The customer can pay by the month, and can start with small and inexpensive channel packages. AT&T, having recently bought DirecTV, will have it offer several internet-streaming-only services later this year. Comcast has experimented with a streaming-only TV service, ditching the cable box, in a few markets. Other cable TV firms are likely to follow.

Cord cutting has not doomed the cable and satellite TV industries. It has only spurred them to innovate, and to offer their customers a better deal. And the traditional pay TV firms are still better at packaging programming in ways that makes sense for most of their customers. In this, most of the streaming-only services are well behind.

Regardless of how many people have been ‘cutting the cord’, cable and satellite TV are here to stay. They may change form. They may adopt ideas from their competitors. But they will thrive.

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