21st Century Fox‘ COO came out swinging against those who say that companies like his — built on the bundled channel pay TV model — are headed for a fall. Chase Carey told analysts today that it’s a “fantasy” to think that a la carte pricing will replace the packages that require subscribers to pay for channels they don’t watch. Nor does he worry about consumer cord cutting. “People will give up food and a roof over their head before they give up television,” he says adding that there’s “no evidence” that lots of pay TV subscribers are beginning to bolt. It’s legitimate to wonder whether young people will never subscribe when they leave their parents’ nests, but that “will play out over the next 10 plus years, not the next three.” He says that there will be some changes, though, as pay TV costs rise. “Weaker channels will and should get squeezed.” Meanwhile distributors should try to build new revenue streams for example from TV Everywhere initiatives. He’s also unfazed by rising sports costs. “It’s the most important content on television, period….It is the content that binds a community.” He defended the rise in costs for regional sports networks, which pay TV distributors say pressures them to raise consumer prices. Carey says that his company’s rates are up less than $1 per subscriber per month. It’s “hard to believe it’s breaking …
All of the major cable, satellite, and telephone company video providers are accounted for following Q2 reports today from Charter and Dish Network. And they show that the collective number of pay TV customers declined by 380,000, a drop of 0.3% vs this time last year. That may look tiny. But independent analyst Craig Moffett, first out of the gate with his analysis of the quarter’s subscription trends, says it’s important because household formation was better than it was a year ago. “Cord cutting used to be an urban myth,” he says. “It isn’t any more. No, the numbers aren’t huge, but they are statistically significant.” Indeed, he says that over the last 12 months about 911,000 homes cut the cord vs 258,000 in the year that ended this time in 2012. That tells him that “the pace is accelerating.” Cable and satellite companies were hit hardest. Cable operators lost 591,000 customers in the quarter. DirecTV and Dish were down 162,000. Some of their losses represent shifts to Verizon FiOS and AT&T U-verse, which together gained 373,000 subs.
A new study suggests that pay-TV providers might not be able to count on today’s 18- to 34-year-olds as longtime future customers. At the Cable Show today in Washington, Pivot — Participant Media’s cable network that launches August — released the first of what says will be an annual industry report about how millennials consume TV content. The study looked at “broadbanders” (aka “cord cutters” or “nevers”), those who do not currently subscribe to pay TV services but have broadband/Internet access and watch TV programming, and “cross-platformers” (aka “strayers”), subscribers who have both broadband and Pay TV. Among the key findings: 13% of 18-34 year olds (8.6 million) who already have broadband service are committed to a broadband-only existence, a much higher percentage than in previous reports. In addition, many cross-platformers are looking to stray from the “pay-TV ecosystem” (17.9 million 18-34s, as well as 32 million 18-49s). But the report also indicates that 7% of at-risk cross-platformers would consider keeping their pay TV subscriptions if offered programming streamed live and on demand anywhere/everywhere, and 58% of broadbanders would consider subscribing to TV for a bundle of networks from their broadband provider, streamed live and on demand. Not surprisingly, 92% of respondents ages 18-34 want VOD streamed everywhere and anywhere and 94% would feel more positively about networks that offer VOD streamed everywhere.
The former King of Cable — who recently agreed to buy more than 27% of Charter Communications – has a bracing warning for companies such as Disney and News Corp that hope to keep raising prices for their sports programming. “You have an unsustainable model,” he told CNBC’s David Faber in an interview. About 80% of viewers would not even pay the wholesale cost for sports if given a choice, he says. And pay TV providers may offer that, perhaps by teaming up with Netflix. “This stuff is getting too expensive for too many households.”
This is a familiar dilemma for pay TV providers: Lots of subscribers who threaten to cancel the service are full of it. The phenomenon shows up clearly in the results of Morgan Stanley’s 3rd Annual Streaming Video Survey, out today. About 17% of pay TV customers in an online poll with 2,500 adults recently said that they’re willing to cut the cord over the next 12 months, with 8% saying that they “definitely” will do so. That would be a catastrophe for most Big Media companies; their profits largely come from cable channels or services. But here’s the thing: 16% gave the same answer last year, and 15% in 2011. And total pay TV subscription numbers remained basically flat. There’s a similar pattern with pay TV customers who say that they’ll cut premium channels this year: 26% recently said they plan to pare back, roughly even with last year (27%) and 2011 (26%). Even so, last year the number of subscribers to HBO, Showtime and Starz was up 4.8%. It’s too bad, because the survey — which has a plus/minus 1.5% margin of error — offers some interesting insights into consumer views about new media. For example, Morgan Stanley found that Netflix subscribers primarily like the service because it’s inexpensive (about $8 a month) and has a lot of content. The number of hours people say they spend …
Don’t tell the Time Warner CEO that cable and satellite subscribers are fed up with rising prices, and tempted to replace them with some combination of free TV and Web services such as Netflix. Pay TV is “getting to be a better deal for consumers and a better deal in the opinion of consumers,” Jeff Bewkes told investors at the Deutsche Bank Media, Internet and Telecom conference. “Even in this recession, you don’t have cord cutting.” What’s more, TV viewing is up at a time when “you have increases in the quality and programming budgets of all these networks.” When companies including Time Warner Cable and Dish Network offer low priced packages with relatively few channels “nobody buys them.” And TV Everywhere will make consumers more attached to pay TV. “It’s all going on demand, on every Internet device you have for free because you have a subscription.” What if he’s wrong, and consumers want something cheaper? Time Warner will still be fine, Bewkes says. “We all know that the reason [prices are] up is the sports fee, it’s not anything else. Half of citizens don’t want that.” But 90% of his company’s affiliate fees come from four networks including TNT and TBS that are built around entertainment. If consumers want bundles without sports then “we’ll be in their bundles.” And low priced offerings would lower the threshold for subscribers to also subscribe to HBO. “That would be great for HBO,” Bewkes says.
PwC says that television execs have a little time to relax before their lucrative business models implode. The consulting firm reached its conclusion after sponsoring a recent debate between the Marketing Association of the Columbia Business School and the Virginia Commonwealth University Brandcenter on the question: “Should advertisers, agencies and the media worry about cord-cutting?” PwC agrees with the Columbia team that with growing competition from Web video providers, and Internet-connected game consoles, “there’s no question that television viewership trends are dramatically changing.” But the firm sides with Virginia Commonwealth concluding that “the impact to the pay TV industry over at least the next five years will be minimal.” The reasons: “Traditional TV viewing is still popular, ubiquitous TV content-on-the-go-packages are becoming commonplace, TV advertising dollars continue to grow, and there are limitations such as content discovery issues with [Web-based] services that need improvement.” Tablets and smartphones, also known as second screens after TV, are becoming important. PwC says that’s no problem for conventional TV: Networks are “developing dynamic companion apps both at the network and show-specific levels to extend viewers’ experience.”