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In a recent report, Strategy Analytics (www.strategyanalytics.com) tries hard to make the case that cord-cutting is not hurting the pay-TV market. The company directs its report, “North America Digital Television Forecast: 1H’12,” at the digital part of the market, and forecasts that digital subscriptions will increase from 114M in 2011 to 129M in 2016, for a five-year CAGR of 2.36%. SA defines the digital TV market as consisting of digital cable, digital satellite, and IPTV.

The cable part of the pay-TV market is declining, says SA, although digital cable subscribers are expected to grow from 49M in 2011 to almost 54M in 2016. We can assume that much of this growth is due to the mopping-up operations in which many of the remaining analog cable providers convert to digital. (Cablevision is doing this in parts of New Jersey now.) Since the overall number of cable subscribers is declining, it’s obvious that cable providers are failing to convert all of their remaining analog subscribers to digital. Where are they going?

SA predicts that subscribers to IPTV services will increase from 8M in 2011 to 20M in 2012. Lumping IPTV in with digital cable and digital satellite neatly obscures the fact that if you use IPTV you are sourcing your programming from the Internet and you are cutting the cord, in whole or in part, to a cable or satellite provider. Let’s subtract SA’s 2011 and 2016 numbers for IPTV subscribers from their numbers from total digital TV subscribers. Then (neglecting the possibility of overlap between IPTV and cable/satellite subscribers), the number of digital cable and satellite subscribers barely increases from 106M in 2011 to 109M in 2016.

Beyond that, SA bases its conclusion that cord-cutting is not affecting digital TV on their conclusion that the number of digital TV subscribers is still increasing, but seemingly does not try to evaluate the number of cord-cutters directly. Other analysts have dug deeper.  In a 2011 study of worldwide TV programming pipelines, “Pay-TV Subscriber Market Data,” ABI reported, “Cable TV still maintains the largest market share; however, its relative share of subscriptions dropped from 72% in 2009 to 69% in 2010. Cable TV operators in Western Europe and North America in particular faced subscriber losses in 2010 as new television services such as telco TV and online TV replaced traditional cable TV services.”

Early this year, the accounting firm Deloitte, in their sixth “State of the Media Democracy” report, said “A number of Americans have already cut, or are exploring cutting their pay TV connection entirely. Deloitte’s survey found that 9 percent of people have already cut the cord and 11 percent are considering doing so because they can watch almost all of their favorite shows online. An additional 15 percent of respondents said that they will most likely watch movies, television programs, and videos from online digital sources (via download or streamed over the Internet) in the near future.  Moreover, the number of people citing streaming delivery of a movie to their computer or television as their favorite way of watching a movie rose to 14 percent from 4 percent in 2009.”

So, is cord-cutting hurting the pay-TV market? Although Strategy Analytics disagrees, the answer is a clear “yes.”

 

Ken Werner is Principal of Nutmeg Consultants, specializing in the display industry, display manufacturing, and display technology.  You can reach him at kwerner@nutmegconsultants.com.

 

 

Posted by Pete Putman, August 3, 2012 1:04 PM

About Pete Putman

Peter Putman is the president of ROAM Consulting L.L.C. His company provides training, marketing communications, and product testing/development services to manufacturers, dealers, and end-users of displays, display interfaces, and related products.

Pete edits and publishes HDTVexpert.com, a Web blog focused on digital TV, HDTV, and display technologies. He is also a columnist for Pro AV magazine, the leading trade publication for commercial AV systems integrators.