Cord cutting – a real threat?

What impact are IPTV and OTT having on cord cutting?

Is cord cutting a real threat to the pay TV industry here in the UK? According to TVB Research (May 2011) in the US there are a record number of American TV households switching from cable to ADS (alternative delivery system) mostly via DBS (digital broadcast satellite). Whilst cable TV still has the largest market share of pay TV market in the USA, this share has declined between 2009 and 2010 from 72% to 69%. Instead digital TV on different pay platforms i.e. IPTV and OTT are taking effect – offering viable choice to consumers.

TVB believe that the cord-cutting phenomenon is definitely real, particularly when the US has the lowest wired cable penetration since November 1989. Contrary to NAB (the National Association of Broadcasters) thoughts however CEA Research believe that antenna sales are falling also, and cord cutters are not shifting to over the air but to the internet instead.

IPTV and OTT are taking effect and offering consumers a viable entertainment alternative. Consumers are unwilling to cancel their pay TV service instead they are viewing more internet video than ever. Factor in the range of non-TV devices now available and that are being used to watch an increasing amount of video and perhaps cord-cutting is not such a real threat? We are in fact just consuming video media in larger volumes and in less traditional locations i.e. anywhere via any connected device.

What does this mean for content owners? We will see an increasing number of Internet-based OTT service providers (consisting mainly of broadcasters offering content online, DVD rental companies that have expanded into streaming services, and retailers that offer online video rentals and purchasing). Where we will see most growth however is where OTT services are delivered into the home via connected devices, such as connected TV sets, Blu-ray Disc players, and game consoles. Revenues generated from OTT transactions initiated via connected devices are forecast to account for 25% of world revenues in 2016, up from 9.3% in 2010.

The rise of OTT services will not have an impact on cord cutting but perhaps instead upon premium pay TV channels?