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OTT Whisper

OTT Whisper
 

Research Question: Will 2015 be the year cord cutting reaches a critical mass?

Companies Covered: AAPL, AMCX, AMZN, CBS, CMCSA, CVC, DIS, DISH, DTV, GOOG, LBTYA, LON:BSYBSYBY, LON:BT.A/BT, LON:TALK, MSFT, NFLX, NLSN, NWS, OUTR, SATS, STRZA, T, TWC, TWTR, TWX, TYO:6758/SNE, VIA, VZ

Report Available: November 20, 2014

 

Blueshift’s initial research shows cord cutting growing as more streaming options become available at the cost of pay-TV services, but some MSOs are embracing change with multiple strategies to survive changing viewing habits.

 

Observations

  1. More and more consumers are abandoning their old style of watching TV shows through a cable box,moving instead to streaming services, like Netflix, Amazon Prime and Hulu Plus. This shift was observed in Blueshift and SurveyMonkey’s collaborative October Trends Tracker report as cutting the cord grew at a rate of 1% a month for four months. Basic cable consumers and non-cable subscribers rose to 36% of U.S. consumers in our survey, including 15% of respondents that were “cord-nevers.” Add-on services are currently surviving the cord-cutting shift, but will face more challenges once HBO Go becomes a standalone option in 2015. A recently proposed rule by the FCC could push this trend to become a permanent and possibly the dominant viewing habit in the U.S., which would allow Internet TV providers to license TV content like cable and satellite providers with broadcasters by changing the definition of multichannel video programming distributor to be technology neutral.
  2. Cable companies are already feeling the pinch from cord cutters. This trend was recently felt byTime Warner, which lost 184,000 TV subscribers during the third  The change in viewing habits is causing cable companies to take on different strategies to remain relevant in the digital age. CBS is embracing it, launching a standalone service for $5.99. Fox Sports allowed cable users to stream the World Series live on computers and mobile devices. One advantage for some cable companies is their control of Internet services, resulting in Netflix paying Comcast to steam its videos faster to avoid losing customers. The escalating use of Internet services and desire for high levels of bandwidth is a major advantage for those that control it as streaming becomes more prevalent.
  3. Sources inBlueshift’s  2013 OTT report did not expect the pace of cord cutting to pick up significantly in 2014. Younger consumers called “cord-nevers” were a bigger long-term concern than those who might cancel their service. Sources said OTT’s growth makes pay-TV subscriptions among “cord nevers” highly unlikely. Pay-TV providers showed signs of embracing OTT, partly because OTT spurs demand for high-speed Internet, which offers better margins than TV service. MSOs were developing software that encourages the discovery of streaming content, even when from OTT providers like Netflix. Pay-TV providers were very likely to introduce streaming-only TV packages in 2014, though the exact look and scope of such services remained up in the air because of content rights issues. OTT’s rapid growth means pricing models for Internet service could change to a system based on bandwidth use. The number of Internet-only homes will continue to grow but only gradually because of the way pay-TV providers aggressively price their “triple play” bundles.

 

To assess whether 2015 will be the year cord cutting reaches a critical mass and determine the implications for all involved, Blueshift will gather data and issue a market research report from independent sources in the following areas: Pay-TV Operators, Movie and TV Executives, OTT Software and Service Providers, OTT Hardware Developers, and Industry Specialists.

 

To see other ideas Blueshift Research is currently working on, please click here.