Concern by cable operators over recent subscription losses due to customers’ “cord cutting” in favor of IPTV or broadcast may be overblown.
That’s the conclusion of a report by U.K.-based Informa Telecoms & Media, which said that the ‘cord-cutting’ phenomenon will have a limited impact on the pay TV market worldwide. In the first ever global analysis of its kind, Informa calculated that there were 1.2 million ‘cord-cutters’ - subscribers cancelling pay TV subscriptions in favor of over-the-top (OTT) video alternatives - worldwide in 2010, equivalent to just 0.18 percent of the pay TV total.
The second half of 2010 was dominated by debate on the impact of OTT, with some commentators suggesting OTT is having little impact on traditional pay TV, while others argue there has been a significant effect on subscriber numbers.
“While the impact of cord-cutting on pay TV has been extremely limited to date, this will change as OTT services will continue to improve and become increasingly attractive. Connected TVs and settops will allow easier access to these services and our forecasts therefore anticipate the number of cord-cutters growing to 16.1 million in 2015. That’s about 2 percent of the total pay TV subscriber base,” comments Adam Thomas, senior analyst at Informa Telecoms & Media.
Cord-cutters by region 2010-2015 (000)
Although the debate has largely been focused on the U.S. market, it is an issue with global ramifications, Informa says. Its latest research highlights this fact, as it identifies that only 36 percent (426,000) of the total number of cord-cutters in 2010 were U.S.-based, with the remainder based elsewhere. Looking ahead, it is possible that less developed markets could ultimately be most vulnerable to the allure of OTT as several of these markets are characterized by higher broadband penetration than that of pay TV penetration.
“We are already seeing significant numbers of cord-cutters in China, as households are attracted away from cable and IPTV by OTT services such as Tudou and Youku. While these services contain a fair proportion of pirate content, they also have some legitimate carriage deals. In China there is always a risk that regulatory intervention will radically alter a market but, for now, OTT is emerging as a fully-fledged alternative to the traditional platforms,” adds Thomas.
Although Informa anticipates growth in cord-cutters over the next five years, there is no suggestion of the global meltdown of pay TV subscribers and business models suggested by the more vociferous proponents of OTT.
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