Lately there has been a lot of chatter in tech and advertising circles about “cord cutting.” Cord cutting commonly refers to the act of eliminating traditional television and movie providers such as Cable and Satellite TV companies. Individuals who do so are referred to as “Cord Cutters.”
There are a few reasons this phenomenon exists:
- On-Demand – consumers want to watch what they want to watch, when they want to watch
- Portability – most traditional providers only offer the standard living room experience.
- Cost – many consumers are paying hundreds of dollars to these providers, in addition to paying for broadband internet.
There are a lot of alternatives available for cord cutters:
- Hulu – Hulu provides web based access to non-HD television shows via web browsers and a desktop application. Cost: Free or $7.99/month for Hulu Plus
- Network Websites & Apps – Most broadcast and cable networks offer most episodes on their websites. Some even have proprietary mobile and tablet apps. Cost: Free
- Over the Air (HD) – Broadcast television networks are available with an indoor antenna. Cost: average $23 for antenna
- Netflix – Netflix offers Watch Instantly for a majority of their inventory of movies and TV series. Cost: $7.99/month
- iTunes Store from Apple offers digital rental or purchase of movies and television shows as well as TV season passes. Pricing for movies and passes vary greatly.
- Zune from Microsoft offers content, pay structures and platforms similar to the iTunes Store.
- TV.com features videos from Hulu and CBS.
- Joost has videos from Viacom (including MTV Networks, BET Networks and Paramount Pictures) and the NHL.
There is a lot of debate as to weither this phenomenon is actually taking place. The results are mixed.
Cable companies publicly say it does not exist. “The cordcutting that won’t go away won’t come either. It hasn’t arrived yet.” – Time Warner CEO Jeff Bewkes
Analysts expects the U.S. pay-TV industry to lose 200,000 subscribers in 2012. However, they credit downward trend primarily to belt-tightening among “economically-driven cord-avoiders.”
A survey from the advertising industry found that people were evenly split on whether they would be comfortable giving up pay TV for another premium option, such as Netflix streaming, Hulu or free streaming options on the web.
The really world numbers have a say as well. Hulu reached 1 million paid users well before they were forecasted to do so. Netflix’s streaming subscriber base is estimated at 22 million users.
What may be most notable are the “Cord Nevers.” Credit Suisse analyst Stefan Anninger said, “The real challenge to the pay TV business model are behaviorally-driven cord-nevers. These are tomorrow’s householders that are in their teens (and younger) today. They are growing up in an Internet-based video culture, in which the mantra of “why pay for TV?“ and “pay TV is a rip-off.”