For Cable Tv A Bad Signal. Viewers Are Fading To Black
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For Cable Tv A Bad Signal. Viewers Are Fading To Black For Cable Tv A Bad Signal. Viewers Are Fading To Black Document Transcript

  • CONTENTS 1 Executive Summary 2 The Challenge What Is Happening? 3 The Challenge Who Are They? What is Happening Cord Cutters - 4 Cord Cutters – Who Are They? 5 Allant’s Point Of View: Tradeoffs and Strategies to Overcome Cord Cutting 8 Allant’s POV: Tradeoffs and Strategies to Overcome Cord Cutting What is Next: Marriage of TV and the Internet 9 Implications for Cable Operators11 Appendix: Alternatives To Cable13 Notes & ReferencesCable video subscribers are the most valuable asset in the entertainment media industry, poweringunprecedented ad revenue growth and programmer fees.Growing subscriber losses raise alarms – and questions on the long term viability of the business model ofcable distributors and programmers. How real is this risk? Can it be contained…or reversed? This Allantresearch study explores video subscriber losses, profiles subscriber segments most at risk, and offers ourpoint of view on how to overcome today’s challenges and capture new subscriber revenue in a rapidlyevolving environment.i  Loss of Cable Video Subscribers and Its Implications
  • EXECUTIVE SUMMARYEXECUTIVE SUMMARYTechnological progress resulting in rise of devices and opportunities to stream content online coupled with pooreconomic recovery have contributed to loss of cable video subscribers. Both cable and satellite providers have seendeterioration in traditional TV viewership. While most viewers would like less expensive services, only those willing toput up with the tradeoffs are choosing (thus far) to cancel cable video for free other-the-air services or multiple cheapover-the-top alternatives. The younger audience is less tied to linear TV and ready to accept the challenges andexperiment with streaming online, while keeping the internet subscriptions.This issue has potential implications not only for cable providers but also for networks and advertisers which couldmiss out on a mass audience and a strong content funding source if nothing is done to stop the trend.Implications for Cable Providers: customers today demand products and services that fit their needs and budgets,and cable providers need to find ways to offer right products to right consumers at the right price and the right place(linear, on-demand, mobile). The first step is to better understand needs of different customer segments and theirbehavior, and offer compelling experience. Loss of Cable Video Subscribers and Its Implications  1
  • THE CHALLENGETHE CHALLENGEIt is no secret that cable providers have been losing Figure 1video subscribers. The cable industry reported almost2MM fewer video subscribers in Q1’2011 vs.Q1’2010 -- about 3% of the subscriber base, and arecord 0.5MM video subscribers lost in Q2’2011.While subscriber losses have hit cable MultipleSystem Operators (MSO) hardest, other pay TVproviders are also challenged. Direct BroadcastSatellite (DBS) operators with their only video serviceofferings that have been poaching customers fromcable have been struggling to add subscribers aswell. Telco companies that traditionally have seengrowth in internet subscriber bases are reportingmodest numbers at this time, with Verizon FiOS andAT&T’s U-verse together adding under 0.4MM videosubscribers. Meanwhile, in 2011 over the air viewersgrew 14% to 17MM, or 15% of all households.These loss trends are a major threat to the business Allant has examined cable video subscription lossesmodel of cable networks and distributors. Video by looking at drivers of cable cancellation and thesubscriptions and their associated ad revenues are state of the marketplace in consumer options to thethe largest source of funding for network cable viewing experience.programmers. A significant shift in viewing behavioraway from linear viewing on pay TV would have a Based on our research, we believe two powerfullarge (10+%) negative impact on industry revenues, forces are driving subscriber losses: 1) Appealingand on the long term viability of the MSO/cable Alternatives to Cable and 2) Negative Macroeconomicprogrammer business model. Factors. While these forces are driving losses for very different reasons, crafting an effective response toSo how real is this risk? The answer depends on how the needs of these audience segments is a criticalrapidly consumer behavior is changing, and how the need for all MSOs, and a key step in maintaining theindustry responds to rapidly evolving viewing options cable business model.and consumer preferences. Studies show viewershave not reduced linear and time shifted Insight is a vital first step to determining appropriateconsumption of their favorite TV shows to date. actions to reduce subscriber losses, increaseDespite an increase in online consumption of video acquisition and retain high value cable videocontent, TV viewership remains the primary platform customers.for viewing video content among all demographics(see Figure 1), by an average of 22 minutes per By exploring and understanding the key segments ofmonth per person over last year. subscriber loss and their behavior, we will show how cable leaders can combine compelling experiencesSo if viewers value and prefer the traditional TV and tailored actions to meet specific segment needsexperience, why is Cable Subscriber loss happening? and overcome business risks.2  Loss of Cable Video Subscribers and Its Implications
  • WHAT IS HAPPENING?WHAT IS HAPPENING?  However, Forrester Research reports that just 6% of US online adults are interested in cutting theA variety of different terms are used to describe cord to replace pay TV services with online video,subscriber losses, including cord cutting, cord and fewer than 2% are very interested in doing sodropping and shaving cord or downgrading. Let’s (Online Video on TV leads to cord-cutting by 2012,differentiate between the terms and those customers Forrester, Mar 30’2011) However, the percentage of users claiming comfort getting rid ofwho completely disconnected from a cable provider cable/satellite to watch via alternative methodsand left (cord-cutters) and those who downgraded almost doubles for internet users.their services dropping video (cord shavers) but stillhave other services with that cable provider. So how do we make sense of the wide range of responses? Saying one is comfortable getting rid ofPolls and surveys suggest differing percentages of cable isn’t the same as doing it. While interest is high,existing subscribers interest in cord cutting, with most subscribers are not (yet) ready to pull the plugestimates ranging from 6% to 48% on cable. A JPMorgan survey found 28% of responders would consider dropping their cable subscription Yankee Group found a mere 2% of video subscribers and using broadband internet for video content. surveyed have actually canceled their TV subscription (“Nothing But Net” Jan 3’2011) for internet/streaming video (see Figure 3). Experian Simmons New Media Study of cable and satellite subscribers reported about 16% of the Traditional TV still remains the preferred method to responders are seriously considering replacing watch video across all generations of US consumers. cable/ satellite service with the internet and Viewers are still very much engaged with linear TV streaming video online.(“National Consumer and prefer to watch their favorite shows in this way. Study”, Jun 1’2011) Advertising Age indicated that 48% of internet Figure 3 users are comfortable getting rid of cable/satellite to watch TV via alternative methods including Netflix, Hulu and other means (Ipsos Observer Survey Jan 24’2011). It implies that experience with watching video over the internet or streamed video are more likely to drop/downgrade cable. (see Figure 2) Figure 2 Loss of Cable Video Subscribers and Its Implications  3
  • CORD CUTTERS—WHO ARE THEY? cord-cutters, who are not interested in costly bundledCORD CUTTERS—WHO ARE THEY? services and who only need a fast internet service, which is a cheaper option for now.So if viewers aren’t opting out of watching TV – justcable - once subscribers decide to leave, where do Figure 4they go for services?We see a growing cadre of cable video subscriberscanceling or downgrading video subscriptions in favorof content services such as Netflix, Hulu/Hulu Plus,etc. The popularity of these content services hasincreased due to high quality content, the availabilityof devices to stream content online, high speedinternet connections, and the growth of socialnetworks. A particularly noteworthy aspect of this shiftto content services is that it is most often seen withyounger, more tech savvy subscribers. In our view this cord cutter profile explains why cable and DBS providers experience loss of their subscribersTo better understand the issue, Allant reviewed data while companies offering the lowest price foron cord cutters and voluntary attrition of a major cable broadband – AT&T and Verizon – are seeing anprovider. increase.Our analysis confirmed that attrition has behavioral Younger, technically savvy males who are lessand demographic segments: interested in live sports programs are more likely to go without cable and rely on broadband to watch video. We found that cable video subscriber attrition rates They are ready to accept the challenges discussed between 3% – 5%, depending on product mix (triple play, video & voice, video & high speed above associated with “know how to set up,” quality of internet, video only) and promotional pricing. content, working devices properly and searching for content on the web. The highest attrition rates are for subscribers with video-only service and the lowest for triple play To attract this audience cable companies need to subscribers, since customers value the cost understand this segment, its interests, needs and savings in bundled services. wants to identify the best product offerings at the right As might be expected, attrition rates peak in the 6- price and place. 12 month period, when promo pricing typically ends and regular rates apply. Although this group has low disposable income now, it Cord-cutters are typically younger (age range of 18- has high earning potential and shouldn’t be 34), single, with low household income and more disregarded as advertisers are very much interested in likely to rent. They are those who enjoy living the this hard-to-get audience. solo life, communicate on a need-to basis and interact with technology. Moreover, there is potential for a generation of “cord never” viewers – 10-18 year old demographics whoAn Experian Simmons study of June 2011 (see Figure are digitally inclined, Internet-savvy and may never4) suggests cord cutters are most likely to be younger sign up for cable services once they leave theirusers in the 25-34 age group that stream video online parents’ household.(50% of cord cutters vs. 30% of households). Theinternet is the main entertainment source for these4  Loss of Cable Video Subscribers and Its Implications
  • ALLANT’S POINT OF VIEWALLANT’S POINT OF VIEW: The proliferation of smartphones and mobile devicesVIEWER TRADEOFFS AND STRATEGIES TO also contributes to the increase the potential demand for watching TV content on the go. Nearly a third of allOVERCOME CORD CUTTING American wireless users are using smartphones, andIs there a single source or device that delivers all almost 10MM Americans own a tablet device. Tablettypes of content? Is it the same experience as ownership rates increased fastest among youngwatching video on cable? Would you consider adults ages 18 to 29, with the majority of these tabletbrowsing the internet searching for a favorite program users watch user-generated content like YouTube anda hassle or not a big deal? Are viewers ok with music video.missing their live TV sports or a finale of their favorite Despite an increase in ownership of smartphones andshow? handheld devices, however, high cost is limiting theThe answer to these questions is - it depends. It growth of mobile video viewing. Consumers generallydepends on: are not willing to pay up to $30 a month to watch linear mobile TV. MSOs with their TV Everywhere The type and quality of content you are looking for bundles have been slowly moving into that space. and willing to accept. MSOs still face a challenge of offering compelling Whether you consider yourself technically savvy mobile service that is appealing to finicky viewers, and able to execute/follow the “guide”. however, and some operators (Cablevision) are facing Willingness to trade off your time to find content legal fights with content providers over access to video online versus the price cable companies charge for on the go. immediacy and ease of use of the service (or in simple terms having more patience than money). Countering Alternatives to CableAnother continuing trend is that cord cutters and While these changes are happening, the feasibility ofshavers are looking for ways to reduce their expenses dropping cord and migrating online, even if all contentand explore free content. was available, trends in viewing economics make this choice more challenging than it may appear.The results of the study from Yankee Group on waysUS consumers expect to reduce cost of their paid TV Higher quality on-line content internet-basedsubscriptions indicate that 36% would cancel programming is likely to become subscriptionpremium channels and 35% switch to a cheaper plan. supported over time, reducing the cost savings appeal of cord cutting. Hulu is slowly moving away from aA June 2011 Adweek study found 44% of US Internet “free content” model and focusing on its fee-basedusers claimed the main driver for dropping cable Hulu Plus, promoting it and making more high qualitywould be availability of free content online, followed by content available.being able to watch that content at the same time asit is aired. As leading online companies such as Hulu and Netflix implement pricing changes, they are making the service more expensive and causing viewers to shy away. After a recent increase in its subscription fees, 41% of Netflix viewers indicated they would cancel the service, according to results of a Business Intelligence poll. Moreover, as of September 2011 Netflix has lost about 1MM subscribers and is expecting to lose another 0.6MM in the next quarter. Loss of Cable Video Subscribers and Its Implications  5
  • ALLANT’S POINT OF VIEWAlso, for the majority, dropping video only and leaving interested in linear TV and demand more control ofbroadband minimizes the cost savings obtained as a their lifestyle - what they watch, where and how.customer would have to buy high quality contentonline anyway and/or pay extra for additional The calculus of cord cutting and shaving is constantlybandwidth. In response to online users downloading evolving, and as access to alternatives becomeshigh quality content (HD and potentially Blue Ray), easier, cable will need compelling content and viewingcable internet providers created caps on broadband experiences to retain subscribers.streaming that increase its cost (examples, Comcast’s A well designed program of tactics to improve thecap is 250GB/month, AT&T—for every additional 50GB cable ‘pluses’ and reduce the cost advantages ofsubscribers use above 150 GB per month limit, they alternatives, based on specific segment needs, ischarge $10). essential to building and retaining the cable subscriber base. While this study provides insightsThe Key Question: into why losses have happened, marketing andWill Consumers Actually Switch? analysis must work closely to test assumptions andIn early 2011 Hill Holliday conducted an experiment, measure true segment preference and how behaviorasking five families to give up cable TV in favor of is changing as new offers are explored.connected TV devices for a week. It providedparticipants with Roku, Apple TV, Xbox 360, Boxee Box Losses due to Negative Macroeconomicand Google TV. Factors Video subscribers are exiting pay-TV services not just because of Netflix or other online video services, but due to cost-cutting initiatives. The great recession has hurt many industries, and cable is not immune to its consequences. A poor economic recovery, high unemployment rates and a moribund housing market all have slowed household formation by about .5MM units per year since 2008 -- reducing the new households for pay TV services to replace losses. In our estimates, macroeconomic factors account for 25-50% of 2010-11 subscriber losses.At the end of the week, these viewers expressed anappreciation of cable and showed no desire to switch Figure 5to the offered alternatives. The main frustrationsexpressed were the lack of availability of live TV, therequired “know how to set up,” onsite programing,usability issues and working the devices properly.The verdict for now is that connected devices are not areplacement for linear cable. Cable marketers shouldnot be complacent, however. Given the progress intechnology and changes in viewer behavior,consumers, especially the younger base, are less6  Loss of Cable Video Subscribers and Its Implications
  • ALLANT’S POINT OF VIEWRecall earlier the study by Yankee Group that found As economic conditions improve, former subscribers2% of video subscribers surveyed have actually lost due to financial hardship represent a prospectcanceled their TV subscription for internet/streaming pool with opportunity for targeted win-back. This groupvideo. This is rate of cancellation is consistent with will include subscribers who downgraded service andoverall industry subscriber losses in the past year former customers. Cable operators must differentiateadjusted for low rates of household formation. between those who are good prospects for offers when conditions improve, and those who are not likelyIn addition, financial hardship has pushed many to be profitable. By separating (via modeling) formercurrent subscribers to seek lower cost options. With customers who are good credit risks from non-payers,over 6MM long term unemployed workers seeking operators can structure offers that reward desiredjobs, family finances are strained, and Pay TV is no behaviors and build loyalty.longer a ‘must have.’How Cable Should RespondCable providers have few options to address negativemacroeconomic trends in the short term. Over thelonger term, however, as unemployment declines andhousehold formation recovers with the economy tomore traditional levels, new opportunities will exist toboost subscriber counts. Loss of Cable Video Subscribers and Its Implications  7
  • WHAT IS NEXT—MARRIAGE OF TV AND THE INTERNETWHAT IS NEXT -MARRIAGE OF TV AND THE INTERNETConnected TV is eagerly awaited by many in the Connected TV would appear to represent a haven forindustry. With advances in technology, TVs are going advertisers trying to bridge the emotion andto possess the capability to connect to internet-based effectiveness of television advertising with theservices, thus opening multiple opportunities for the metrics, interactivity and audience targeting ofcable company’s marketers and advertisers to reach internet advertising. For example, rather thanthe widest audience possible. On the other hand, distributing a standard commercial, advertisers couldconsumers having access to their computers and run the same ad with the option for connectedmobile devices demand interactivity and are engaged consumers to pull up additional information, readwith social media while watching their favorite shows. consumer reviews and locate a store — all with theWith connected TV, broadcast and social media will click of the remote control.blend, leaving less incentive for cord cutting. Additionally, with connected TV, ad content can beIt seems that connected TV is best served by having targeted and relevant, and based on consumers’dual delivery methods. Content can be delivered via interests and behaviors. This means ads will be moretraditional coaxial connection while interactive personalized and tailored to an individual viewer,features can stream through an IP connection. As a opening opportunities for addressable or targetedresult, TV will become yet another connected screen advertising.where consumers’ data can be accessed and used forvarious purposes. As a result, the integration of TV andthe internet is likely to have a significant impact onfuture product developments and enhancements. Oneaspect is the already increasing development ofapplications for gamers, music lovers, karaokesingers, shoppers, etc. with a number of featuresincluding the ability to participate in TV show trivia,vote for a favorite actor, purchase an item seen on TV,play along with a favorite game show, or view relatedvideos and photos.Consumers love TV shows and enjoy discussing themwith friends. On any given night, at least 2 or 3 of thetrending topics on Twitter are about something that’shappening on TV shows right at that moment. If acompany wants to help keep a favorite show alive withproduct placement among characters, it uses thebrand in exchange for engaging viewers via “t-commerce” –which is a win-win for everybody.8  Loss of Cable Video Subscribers and Its Implications
  • IMPLICATIONS FOR CABLE OPERATORSIMPLICATIONS FOR CABLE OPERATORS Jeff Bewkes, CEO of Time Warner, said “The devices may be cool, but anything that cost money to produceConsumers want more control of their life. People must be paid for, and any service or channel thatwant content at a reasonable price and the ability doesn’t carry its weight is destined to die. By lettingwatch what they want. That means control over the customers stream unlimited content for a small fee,pricing of the content (no charge, pay-per-view, small could make the pay channel obsolete. You wouldfee, or downloading), portability of the content (TV agree that giving away your content almost free is notanywhere concept) and availability at their a good business model. It is likely that the world wouldconvenience (time shifting, anytime). move to a model where consumers will pay one price to get a distribution service and another for theSo, is the sky really falling? We believe the noise is content they actually want. Those who own theoccurring due to experimentation on all ends – content would reap most of the profits.”viewers, networks and providers who are trying tofigure out what works and what does not. As of now, In closing, we offer our summary of observed trendsfor the majority of viewers, connecting devices and and what they mean for cable providers andsearching the internet for quality content seem to marketers.require more effort and know how than turning to atrusted old friend – cable TV.  Traditional linear TV commercials still remain the most effective way to reach customers with ads atHowever, things are changing dynamically and the any given time. as Michael Zuna, CMO at Aflacimplications of these changes are significant. The states, “Video is still an unbelievable medium thatexisting business’ model upon which most cable combines sight, sound and motion in a way thatcompanies have traditionally operated is becoming print and other static mediums do not”.less sacrosanct. The “one size fits all” approach,  It appears that the majority of cord-cutters today, aoffering the same services and bundles to everyone, is group of 18-34 year old subscribers, are pricebeing questioned openly by cable operators , and sensitive with more time and patience than money, and ready to accept the challenges of using cableexperimentation with a la carte type pricing is TV alternatives.underway.  Cable providers are taking proactive steps to giveIn this study, we have identified segments of ‘at risk’ subscribers more control over the viewingcable video subscribers with different needs and experience. The supply of content for video onwants. To slow subscriber losses and reverse recent demand platforms is expanding rapidly, and cabletrends, it is critical for cable companies to understand providers are finding ways to make dynamic ad insertion work, enabling monetization of Video Oneach in depth: (what they watch, where and how), Demand.what product fits to which segment/channel, and eachviewer’s willingness to pay given their alternatives.  TV Everywhere and Smart TV concepts will gain more popularity. Increased usage of smart phonesCable companies need to find ways to provide content and tablets with advances in navigation solutionsat the right price, deal with changes in technology and will allow US consumers to search and access video content more easily. Service providers suchcreate and promote a compelling on demand/online as Comcast, Time Warner Cable and Cablevision,experience. Creating options that meet each who have the majority of viewers, can leveragesegment’s needs benefits not only cable providers but their scale advantages to ‘take the air out of thealso networks and advertisers. room’ from competitors. Loss of Cable Video Subscribers and Its Implications  9
  • IMPLICATIONS FOR CABLE OPERATORS Cloud based services are key to cable innovation.  Younger viewers, more than any others, are By making the user experience more personal and changing their viewing behavior and transitioning valuable, these services increase subscriber loyalty online. So it makes sense for marketers interested and create innovaive opportunities for viewer in this audience to reach them online with targeted monetization. advertising. Cable providers should explore Social media is changing the way audiences opportunities to adjust their product offerings and engage with TV, with users are multi-tasking on create a compelling online experience to win them digital devices while watching content. We see the back. continued growth of new platforms that enable TV Will the cable and media industry be able to maintain networks to interact with the audience leveraging control over the content and audiences while taking insights and quantifying the value of second-screen advertising dollars. advantage of technology innovation? Answering this question defines whether we will see significant shift Broadcasters still have to address challenges they in viewership from traditional TV which entails cutting face in the mobile market to offer a compelling service that excites an audience accustomed to and shaving cable to migrate online. time shifting. Networks could become more aggressive in negotiating rights for VOD as the viewership grows and reaches scale, as Brad Adgate, senior vice president of research for Horizon Media claims. Even though online video currently offers marketers more targeting than they get from linear TV, as digital set-top boxes offer more robust data TV ad targeting will neutralize online video’s advantages. Advanced advertising systems will enable highly targeted advertising that makes use of the service provider’s knowledge of their audience to integrate targeted ad campaigns across linear, online and VOD viewing audiences.10  Loss of Cable Video Subscribers and Its Implications
  • APPENDIX: ALTERNATIVES TO CABLEAPPENDIX: ALTERNATIVES TO CABLE surface, but certainly acceptable to some viewers. While most viewers would like less expensive services,Pay TV Operators only those willing to put up with the tradeoffs are choosing (thus far) to cancel cable video for free over-DBS operators DirectTV and Dish Networks have been the-air services or multiple cheap over-the-topadding features and services comparable to those of alternatives.cable providers in video products, and offer a lowerprice to their new customers enticing cable 10% of US adults are watching online video viasubscribers to switch given that there are almost no different internet-connected devices. Adding to itsswitching costs for video viewers. However, both appeal, much content is available free of charge.operators have experienced very high churn rate Technology offers newattributing it to intense competition and a poor ways to watch videoeconomic recovery. content, with a growing amount ofPhone companies AT&T/U-verse and Verizon/FiOS content on serviceshave built and continue building wireline fiber-optic- such as Netflix,based networks, in some cases using Internet protocol Hulu/Hulu Plus,technology that provide high speed internet in areas AppleTV, YouTube,generally served by cable companies. Given advances Amazon, Google TV,and facing less technological challenges, these network websites, etc.companies can offer lower prices for similar types orbetter services (see table below). Not surprisingly they According to a study by Frank N. Magid Associateshave seen growth of their subscriber bases. (July 2011), the most popular devices used by internet users to stream video are AppleTV followed by Roku, Product/ Video Video & HS Internet Triple while Slingbox and Boxee Box are not gaining as much Provider Only Internet Only Play popularity as anticipated. Slingbox was not embraced by cable companies because of its ownership and $29.99/ $69.99/ $19.99/ $99.00/ Comcast affiliation with a competitor - Dish Network. However, 12 mo. 6 mo. 6 mo. 12 mo. to retain its profitable customers, Time Warner Cable $49.99/ $54.99/ $19.99/ $69.97/ Charter recently announced plans to subsidize Slingbox for its 6 mo. mo. mo. 12 mo. top-tier Internet service subscribers, indicating that $29.95/ $99.80/ CVC * * the Internet service is becoming its core offering. 12 mo. 12 mo. Boxee on the other hand seems to have some issues $29.99/ with programming and its usage which have not DirecTV n/a n/a n/a 12 mo. helped the adoption percentage. ATT/ $29.00/ $49.00/ $19.95/ $89.00/ Uverse 12 mo. 6 mo. 12 mo. 12 mo. Google TV with its Android-based operating system is Verizon/ $64.49/ $79.99/ $14.99/ $99.99/ lagging behind other streaming providers due limited FiOS mo. 12 mo. 6 mo. 24 mo. content. In addition, given competing advertising models, cable programmers and operators are notSource: websites of the above companies as of Aug 2011 likely to back the Google initiative anytime soon, potentially cutting the Google service out of the bulk ofOnline Streaming and Over The Air (OTA) its market.Providers As for over the air (OTA) service, reception quality canDisconnecting cable in favor of broadband and over- be a problem in urban areas, and live sports programsthe-air is more challenging than it seems on the featuring local teams are often on cable networks. It Loss of Cable Video Subscribers and Its Implications  11
  • APPENDIX: ALTERNATIVES TO CABLEis interesting to note that OTA service has been Using online sources for video content is mostgrowing rapidly among the increasing Hispanic prominent for a group of 18-34 years old, per thepopulation which, in general, is less interested in local Morpace Omnibus report. “On Demanders,” on thesports programming. other hand, are somewhat older viewers, an average of 38 years old (23% are 18-24 years old), haveVideo On Demand college degrees and a median income of $65K (SAY Media, Oct 2010).While traditional TV still remains the most preferredway to watch video, comfort with new viewing According to a PwC survey (February 2011), 42.6% ofalternatives is growing. Video on demand is gaining the responders indicated they use Netflix’spopularity - 45% of the Consumer Electronics subscription service, 31.7% stream TV content from aAssociation study responders indicated that they use it small-fee subscription service, while 30.7% obtain TVas a source of video content, 72% indicated that they content for free. A Diffusion Group study indicatedwatch movies and TV shows on DVD, VHS or Blue-ray 37% of cord-cutters watch half or more of their TV ondisc, 27% cited a paid subscription service such as Netflix and Sandvine Research reports that NetflixNetflix or Hulu Plus used to access movies or TV accounts for nearly 30% of downstream internet trafficshows, while only 4% of responders have used during peak viewing times.streaming video from a mobile phone (see Figure 6). Virtual MSOs such as Netflix and Hulu/Hulu Plus are Figure 6 leading sources for video content online, with Netflix representing over 20 MM users and Hulu, gaining share from 4.2% to 4.6% (March’10 vs. March’11). One Touch Intelligence has found that 4%, or almost 1MM viewers, of all Hulu subscribers are Hulu Plus or its fee subscription users. According to Nielsen, Netflix and Hulu are complimentary to each other with Netflix used mainly to watch movies (53%) while Hulu to watch TV shows (73%).12  Loss of Cable Video Subscribers and Its Implications
  • NOTES AND REFERENCESNOTES AND REFERENCES Loss of Cable Video Subscribers and Its Implications  13
  • NOTES AND REFERENCES Source: Morpace Omnibus Report, 2010© 2011 Allant Group, Inc. All Rights Reserved Confidential & Proprietary
  • NOTES AND REFERENCESLoss of Cable Video Subscribers and Its Implications  15
  • NOTES AND REFERENCESENDNOTES Figure 1: Nielson, “State of the Media: The Cross-Platform Report,” June 15, 2011 Figure 2: J.P. Morgan, “Nothing But Net 2011,” provided to eMarketer, Jan 3, 2011 Figure 2: Advertising Age survey conducted by Ipsos Observer, Jan 24, 2011 Figure 3: Yankee Group, “Pay Tv’s Uncertain Future,” Aug 31, 2010 Figure 4: Experian Simmons, “National Consumer Study,” June 1, 2011 Figure 5: Special Study for Housing Economics, “Pent-up Housing Demand: The Household Formations That Didn’t Happen—Yet,” Robert Denk, Robert Dietz, PhD and David Crowe, PhD, February 2011 Figure 6: Consumer Electronics Association, “Cord Cutting and TV Service: What’s Really Going On?” conducted by Opinion Research Corporation, May 31, 2011 Appendix and Notes Section: - Nielsen: Based on total users of each media - Experian Simmons, “New Media Study,” June 1, 2011 - Frank N. Magid Associates, “Magid Media Futures: Online Video Reaches New Heights in Digital Nation 2011” sponsored by Metacafe, July 22, 2011 - PricewaterhouseCoopers, “The speed of life: How consumers are changing the way they watch, rent and buy movies,” Feb 1, 2011 - Yankee Group, “Pay TV’s Uncertain Future,” Aug 31, 2010 - Nielsen survey data: March 2011 - Elastic Path Software, “Monetizing Online Video 2011” conducted by Vision Critical, Jan 31, 2011© 2011 Allant Group, Inc. All Rights Reserved Confidential & Proprietary