Cable vs. Online Content: Analysts Address Three Hot Buttons

There’s nothing better than a good point/counterpoint discussion (who can forget Jane Curtin and Dan Aykroyd on “Saturday Night Live?”) between subject-matter experts, especially when it concerns cord cutting, a la carte and authentication in front of an audience of cable-industry players.

At yesterday’s SeaChange-sponsored “Monetizing Multi-Screen Video” summit in New York City, veteran analysts Craig Moffett (vice president/senior analyst at Sanford C. Bernstein & Co.) and Colin Dixon (senior partner/Advisory at The Diffusion Group and executive consultant/market analyst for his own Tech-Wrangler business) tackled these three hot buttons, with Moffett firing the first shot, saying talk of cord-cutting has more to do with economics than it does with viewers preferring to watch programming in ways that don’t involve cable.

“It has to do with poverty, and broadband proliferation has to do with income,” he said. “Forty percent of U.S. households live on $20,000 a year after taxes. They have to make a choice between paying for a cable subscription and buying food.” They also can’t afford a high-speed Internet connection, he added.

Agreeing that cable has become “much less affordable,” Dixon pointed out that those who stream Netflix watch 5.5 hours of content per week from that provider, and 8 percent of them have said in surveys that they might cut their cable subscription completely. On the other hand, “10 percent of cable-only subscribers said they might cut the cord,” he said, “so it’s the Netflix subscribers who value their cable subscriptions more.”

However, they both took a swipe at cable surveys in general, with Moffett saying, “Anyone can draw anything from the data,” while Dixon stated, “Most survey data is nonsense. The sample sizes are too small.”

A La Carte And Customer Choice

Moffett and Dixon also view a la carte through two completely different lenses, but they do agree it’s all about pricing at the end of the day.

Starting out, Dixon said, “ESPN is benefiting from ‘content insurance.’ I don’t use ESPN that much, but I’m paying for the people who do.” Pointing out that programmers believe they wouldn’t be able to make the same money offering single-subscription rates for online presentation, he did the math: “Say the Outdoor Channel wanted to launch online with 12 ads an hour, in HD, and offering subscription, on demand and pay-per-view options. With 700,000 subscribers at $2 a month, they could make the same online as they do on cable.”

Countering that, Moffett said, “On the other hand, Disney doesn’t say ‘gee, how could we sell one channel a la carte?’ They think in whole families of channels. And the Federal Communications Commission has failed to mandate a la carte because it wouldn’t stand up in the Supreme Court.”

Answered Dixon, it all comes down to what the consumer is prepared to buy. “In five to 10 years, it will be a radically different (content) world,” he said. “We are so focused down that one content picture (video), but the content universe is bigger: newspapers, magazines, Hulu, etc. Over time, choices will multiply, not contract.”

He continued, “Here’s the problem: Consumers see more choice with online stuff and more people can participate in online stuff. In the long term, cable’s core value will be devalued by online competitors.”

Moffett then took the opportunity to hark back to an article he wrote about ESPN presenting some of its content online in 2005, saying users complained about all the logins and passwords they had to use to get to the information. “Then Google came along, and then Apple and then coax connected to the TV,” he said, “so doesn’t cable have it all right now? What people really are complaining about is price.”

Thinking Outside The Home

The two analysts appeared to be most in agreement regarding the future of authentication on the devices consumers want to use when it comes to accessing content, with both believing cablecos and programmers alike are trying to remain open-minded when it comes to allowing programming to leave the confines of a subscriber’s home.

“What operators and content owners want is clarity,” Moffett said. “The issue is streaming outside of the house, and Nielsen can’t track this. We’re still in the infancy. Content owners are just now figuring out what the technical people have known for years.”

Added Dixon, “Content providers want to protect the franchise, but they also know there’s something unique with what’s going on with the Internet. They want to understand it, and they want to keep their options open.”

-Debra Baker