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VoD under cord cutting threat


Published: 24 February, 2012


Outright cord cutting is still not evident in the US, as has been confirmed not just by the recent crop of 2011 results from the operators but also from several surveys. There is leakage around the cord, which if not stemmed could lead to complete severing, if operators do not take appropriate steps, and perhaps even if they do.

The financial results themselves have indicated that, with one or two outliers still to come in, the number of homes subscribing to cable television in America decreased by 4.1% over 2011, but satellite went up 2.1% and IPTV went up by 21.1%, representing a marginal net gain overall. So while 5.1 million US homes now subscribe to broadband and receive only Free To Air broadcast, an increase of 22.8% over the year, this merely indicates that those who had opted out of pay TV before, or could not afford it, now have broadband as a low cost additional source of content.

A more nuanced picture emerges from one or two surveys. According to consumer market research firm NPD, there has been erosion from pay TV to online services for transactional VoD, but this does not equate yet to cord cutting. The US market for paid movie rentals is still dominated by pay TV services, with revenues of $1.3 billion, but the internet video-on-demand (iVoD) movie market grew 43% to reach $204 million. At the same time 4 million less pay TV VoD users made once off payments to watch movies in August of 2011 compared with August 2010, confirming that there has been a switch in transactional VoD to online.

According to information from NPD's VideoWatch VoD tracking service, 15% of US consumers ages 13 and older used pay TV VoD movie services from a cable, satellite, or fiber-optic provider in the twelve months ending August 2011, which translates to 40 million users. By contrast the iVoD channel, which includes movie offerings from iTunes, Amazon, Vudu, and others, has already reached seven million users. One out of every six paid VoD movie-rental transactions were attributed to iVoD in 2011.

The reason pay TV subscribers take the online route is that iVoD movies are cheaper, or perceived to be, and iVoD providers have been successful with free trials and other promotions to get consumers into the habit of using their service. The survey was based on NPD's VideoWatch VoD tracking service compiled from more than 22,000 members of its online consumer panel, which reports on a-la-carte paid movie rentals only. It does not include free or paid viewings of television shows or series, or Netflix streaming movie subscriptions, or for that matter free movies from pay TV providers which are included in their subscriptions. The implication is that pay TV operators still have a chance to reverse this exodus of VoD business through more intelligent or attractive offers exploiting their ownership of their customers, but that time is running out.

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