The Real Cord-Cutting Reality
Washington, D.C. (September 4, 2013) -- This is an update on our earlier articles on cord-cutting.
SNL Kagan yesterday issued a study saying that the pay TV industry lost a net of 366,000 subscribers in the second quarter. It didn't take long for the media to immediately pronounce the loss was due to 'cord-cutting,' the term known for dropping your pay TV service to watch inexpensive video online, such as Netflix.
The Los Angeles Times ran this headline: "Cord-Cutting Reality." The Hollywood Reporter's lead paragraph read: "An SNL Kagan report shows...viewers continue to cut the cord." Multichannel News chimed in: "The domestic pay TV market is also feeling the effects of a small but growing cord-cutting trend."
Problem is, the SNL Kagan press release doesn't even mention cord-cutting. Don't believe me? Read it here.
Kagan's release, in fact, notes that the pay TV industry traditionally has a poor second quarter due to a variety of factors from the end of the TV season to daylight savings time (more people outdoors) to you name it.
"The seasonally soft period followed the script of a mature industry that is concurrently struggling to make gains while still holding a significant but not absolute share of the U.S. market," Kagan's lead paragraph states.
The release also states that the pay TV industry's second quarter loss was 11 percent lower than the second quarter loss in 2012 and that the two telco TV services, Verizon and AT&T, actually added more than 400,000 net subscribers in the second quarter.
This is not the first time that the media has jumped to conclusions that the evidence does not support on the issue of pay TV subscriber defections. (See:Leichtman.) It appears that cord-cutting has become a short-hand explanation for every viewer who ever drops a pay TV service, or even switches to a different one.
This is not to suggest there aren't people who eliminate their pay TV service to watch Netflix or a variety of video streaming services. But as even the Multichannel News writes, the number is small. Other factors, albeit less sexy ones, are responsible for the small decline in pay TV subscribers over the last year, including, as Kagan and Leitchtman Research note, a maturing of the industry. The so-so economy is another contributor, as is the struggling housing industry.
But somehow the media enjoys attributing all subscriber defections to cord-cutting; rarely is any other factor even mentioned. It's an easier story for them if they frame it as pay TV vs. Netflix. (The Street.com here does a good job of highlighting the hype over cord-cutting.)
But this serves no one, and just reinforces the perception that media bias extends beyond the political landscape.
See our earlier articles on this subject.
Study: Pay TV Subs Fall In 2Q - But Don't Credit Cord-Cutting
Washington, D.C. (August 19, 2013) -- This is an update on our earlier article on Leichtman Research's findings on pay TV subscribers. See earlier article below.
Leichtman Research Group today released a study that showed that the 13 largest pay TV providers lost 345,000 net subscribers in the second quarter, compared to 325,000 in last year's second quarter.
The top nine cable operators lost about 550,000 net subscribers in the 2013 second quarter while the nation's two satellite services (DIRECTV and Dish) lost 162,000. However, the telco TV operators, Verizon and AT&T, added 373,000 subs, compared to last year when they added 275,000.
In a press release, Bruce Leichtman, president of the research group, noted that pay TV operators normally fare poorly in the second quarter.
"The traditionally weak second quarter proved to be a down quarter for the multi-channel industry, but industry-wide losses were similar to recent second quarters," he stated. "The multi-channel video industry has leveled off, with major providers losing about 0.1 percent of all subscribers over the past year."
Leichtman generated some controversy in May when he released a similar study that found the pay TV industry lost 80,000 net subs in the past year, the first year-to-year decline ever. He also said at the time that cord cutting -- dropping pay TV service in favor of inexpensive online video such as Netflix -- was one reason for the drop, although he said it was a relatively small factor.
However, some analysts and tech journalists seized on his remark, saying it proved that cord-cutting is a significant trend and that Leichtman, who has discounted cord cutting in the past, was now declaring it was the real deal.
However, Leichtman told TVPredictions.com that his statement had been overblown by analysts and journalists who seem anxious to push cord-cutting as a trend. He said the industry's
saturated market and the so-so housing market would be responsible for about 70 percent of the year-to-year defections. Cord cutting and tighter credit policies combined would account for only around 30 percent.
In today's release, there was no reference to cord-cutting as a reason for the second quarter decline.
Below is our earlier article on this subject.
Why Is the Media Hyping Cord-Cutting?
Washington, D.C. (May 24, 2013) -- Bruce Leichtman, president of the Leichtman Research Group, released a study this week saying that the pay TV business lost 80,000 subscribers in the last year. While the number may not seem significant since pay TV providers still have 94 million customers, it was the first time the industry lost subscribers over a 12-month period.
Leichtman's press release noted there were several reasons for the losses, including a saturated market (87 percent of Americans subscribe to pay TV services), a struggling housing market, tighter credit policies by TV providers and -- uh, oh -- people dropping their pay TV services to watch video online, a practice better known as 'cord-cutting.'
"First-time ever annual industry-wide losses reflect a combination of a saturated market, an increased focus from providers on acquiring higher-value subscribers, and some consumers opting for a lower-cost mixture of over-the-air TV, Netflix and other over-the-top viewing options," the release stated.
While Leichtman's statement listed cord cutting as the last reason for the pay TV defections, the tech media ran wild with the release, writing stories that made it sound like millions and millions of people would soon drop their cable or satellite subscriptions. Tech journalists who have for years predicted a cord-cutting revolution could hardly contain their glee.
GigaOm.com ran a headline that said: "Pay TV is hurting and even skeptics admit that cord cutting could be at fault." The story noted Leichtman once mocked cord cutting, but now seemed to be embracing the trend. (Of course, GigaOm.com didn't explain how "skeptics" were admitting cord cutting was at fault when Leichtman was the only person quoted in the story, via his press release. Skeptic apparently means skeptics.)
Variety published a story under the headline: "Cord-cutting: At last, hard evidence it's really happening."
"The specter of cord-cutting has finally caught up to American pay TV providers, which have suffered their first net loss of subscribers over a 12-month period, according to an analysis by Leichtman Research Group," the Variety article began.
And there were similar stories from sites such as Business Insider, which wrote the study indicated that the 'death of pay TV" was "actually starting to happen."
By now, you probably know where this article is going.
Leichtman does not believe that cord cutting is a major trend, or even a major contributor to the loss of those 80,000 pay TV subscribers. In fact, if he had to rank the causes, he would say that the issues of a saturated market and the so-so housing market would be responsible for about 70 percent of the defections. Cord cutting and tighter credit policies combined would account for only around 30 percent.
The tech journalists would know this if they had asked Leichtman.
But they didn't.
"No one called," he told me in a telephone interview today. "(One writer) did e-mail me to confirm the numbers, but no one asked my opinion about cord cutting or why pay TV lost 80,000...It wasn't because of cord cutting."
Leichtman said it appears that many tech journalists were not interested in putting his study in perspective because they were so anxious to write a story saying that cord cutting is a revolution ready to happen.
"They've been saying it for years. That cord cutting is like a Tsunami ready to destroy the pay TV industry," he said.
But Leichtman noted that in a universe of 94 million, the loss of 80,000 subscribers is "very little." And, he does not think that pay TV is dying, as Business Insider wrote.
As for cord cutting, he did acknowledge that the down economy and the growing popularity of Netflix has increased the total number of people who have ditched their pay TV service over the last several years. He said roughly 400,000 people could now be classified as cord cutters. But that's still less than one-half of one percent of the pay TV universe. (400,000 vs. 94 million.)
"Let's put it in perspective," Leichtman begs.
But Leichtman laments that some tech journalists are not interested in looking at the big picture, which shows that cord cutting has yet to become a major trend, much less a reason why pay TV is about to die.
"It's not sexy," he says, adding: "I can't believe no one called me. No one calls anymore."
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