Two reports on the state of mass media’s future, both in Canada and worldwide, have just been released, and each sheds some interesting light on the various challenges and opportunities faced by a cable industry that, contrary to what casual observers may believe, is not even close to being on the ropes.
Those who dream of a revolutionary future of cord-cutting, and saying goodbye to those hefty cable TV bills, have got a long, difficult rope-a-dope death match ahead of them, with a well-fortified opponent multiple times their size.
The first report, in the latest edition of the quarterly Canadian Digital TV Market Monitor, published by Ottawa’s Boon Dog Professional Services, finds “evidence of ‘cord-cutting’” emerging in Canada’s publicly traded TV service provider market, with a loss of 8,175 subscribers in Q4 of 2012 and 5,394 in Q1 2013. The players considered in Boon Dog’s report are Rogers, Shaw, BCE, Vidéotron, Cogeco, TELUS, Bell Aliant and MTS. From the sounds of those numbers, it sounds like those guys are bleeding subscribers, much to the delight of cord-cutting advocates who trumpet an inevitable (and swift) victory over opponents.
On the other hand, a study by Price Waterhouse Coopers called the “Global Entertainment and Media Outlook 2013-2017” forecasts that the number of subscribers to Canadian cable television will increase by 800,000 during that same period. The only way that this is a “loss” for the big cable companies is that they used to be able to rely on adding approximately 220,000 subscribers per year (rather than the mere 160,000 forecast in the PwC report).
Approximately 12 million people subscribe to cable TV in Canada, making it a $6.9 billion industry. The projected “loss” will reduce it to a $6.4 billion industry in 2017. That won’t kill the cable companies, not even close.
While cord-cutting sounds like a sexy trend that journalists can spin a story around (“Ten Reasons Cord-Cutting Is Killing Cable”), the numbers for this actually happening in anyone’s lifetime are simply not there.
The Boon Dog report points out that the loss of subscribers to cable TV over the last two quarters represents “the first time that the traditional TV subscription market has declined in size since essentially the launch of cable TV in the early 1950s.” While Netflix is certainly growing its numbers, what these reports suggest is that more industry players are competing for a very slightly expanding pie. So while cord-cutting sounds like a sexy trend that journalists can spin a story around (“Ten Reasons Cord-Cutting Is Killing Cable”), the numbers for this actually happening in anyone’s lifetime are simply not there.
What do the media giants need to do in order to retain control of the situation? Marcel Fenez, PwC’s Global Leader in Entertainment and Media, puts the problem as “a need to gain consumer insight, and to react with agility and innovation, both in terms of business models as well as operating models.”
Consumers are increasingly able to consume content from a variety of sources, which presents a challenge for both advertisers and distributors. “For advertisers, as ever, the key is around data upon which to make decisions as to where to place the ad dollars,” Fenez states. Advertising must eventually become platform-agnostic, while the measuring of consumer engagement across multiple platforms remains a stubborn problem. “This is an opportunity for advertisers, but it still requires gathering and mining data around consumer preferences.”
As the norm shifts from consumers passively watching content on a big single TV eye in their home to interacting with that content via “second screens” and sharing and interacting with it across their social media networks, the challenge for content creators, broadcasters and advertisers remains how to meet the consumer on his or her own terrain and cultivating trust.
While it’s a convenient idea that cord-cutting will inevitably bring the Goliath media companies crashing down, one has to also take a cold-eyed look at the actual situation. The numbers are encouraging if you think of it as an almost geologically paced long game, with no more massive media conglomerates entering the market or innovating until the 22nd century. Not so much if you’re hoping for the end of cable TV as we know it in the next five years.
This is not the record industry, which was almost totally destroyed by a single innovation.
This is not the record industry, which was almost totally destroyed by a single innovation. File sharing, which began as Napster and then basically morphed very quickly into a legit version (iTunes) and digital downloading (piracy), has reset our day-to-day sense of what music is. Not many shed a tear for the demise of the record industry. Television, on the other hand, has managed over the decades to work its means of support (advertising) directly into what people regard as “content” (the programming itself). It is not likely to be brought down by a bunch of ad-free webisodes and “agile” independent producers.
It’s painful to dump water on the good (if slightly narcissistic) intentions of the advocates of cord-cutting. But the PWC report sums up the challenge quite succinctly: “For all the industry talk of disruptive threats to its business models, the pay TV industry, on a global level, is proving very resilient. The demand for premium TV content remains strong among consumers, especially those in emerging markets, and the market overall will continue to grow.”
The real changes ahead for media in general lie in developing markets like Brazil, India and China, and definitely spell out a shift from fixed desktop or laptop computers to mobile devices. TV sets, though, in first-world countries are more likely to be “disrupted” by the shift from HD to 4K than by the lure of saying goodbye to television.
Why the torpor among Canadian consumers? Basically, sports. Deloitte Canada recently reported that 99% of cable subscribers will keep their connection because they don’t want to miss out on live events, even if they do increasingly use second screens to yack with others via social media while the game is on. That combined with the fact that the cable companies, who also own the internet service providers, have implemented arbitrary data caps. So while a Netflix subscription sounds like freedom to many, an overage charge on your next bill will shock you back into the arms of the cable companies.
The revolution won’t be televised, it will be Tweeted, Facebooked, Instagramed, YouTubed and maybe even Google Plused. But the decision about whether to pay for cable TV or not isn’t a revolution, it is, contrary to most media reports, something much more boring and gradual.