Is Cord Cutting Real?

With the explosion of entertainment options available to the internet savvy in the last couple years, there’s been a great deal of discussion and a fair amount of reporting about a trend, including debate on whether it is imagined or real. Are internet-savvy households abandoning their cable/satellite providers, substituting over-the-air (OTA) TV reception and VOD access (and saving a chunk of dough in the process)? The cost of TV, once as free as the air we breathe and as American as apple pie, has climbed significantly for most households and the expectation is that it will continue to climb. TV antenna

A recent study by the NPD Group determined that the average monthly cost of pay TV in the U.S. hit $86 in 2011 and is projected to rise to $123 by 2015. That’s on top of broadband Internet access, which can chew up anywhere from $20 to $205 per month, when it isn’t bundled with a cable subscription.

The dollars start to add up, and quickly. (In addition, it’s hard to find anyone who are thrilled by their cable provider.) So, high expense for perceived low service equals restless customer base. The tech-savvy portion of that restless audience is voting with their TV antennas.

This year, 19.3% of U.S. TV homes — 22 million homes — will be broadcast-only and not subscribing to any pay TV service. A year ago, some 20.7 million-plus homes were broadcast-only, per researcher GfK. The research company says this would be nearly a 40% rise from three years ago, when 14% of TV homes were [not]paying for TV via cable, telco, or satellite TV distributors. [Edited for clarity-RB]

There are a number of services which have moved to fill this void, from iTunes to Hulu, Amazon to Vudu. The rise of these services, parallelling the increasing popularity of tablets and mobile viewing, has spawned a minor boom for digital studios like Giant Interactive, keeping us and a smallish group of competitors busy converting every kind of content imaginable, from current TV shows to back catalog documentaries, to digital form. While industry organizations such as the Entertainment Merchants Association have been working on standardization, the variety of files and delivery protocols required by the numberous portals keeps the level of technical expertise high. But are households really giving up on the paradise promised by 500 channels of variety? Most people actually only watch a handful of channels, perhaps no more than 10-12 and more and more people are foregoing the ‘appointment TV’ of yesteryear in favor of ‘binge viewing‘ of their favorite shows.

DVRs, OnDemand, and the Internet have made the programming clock almost obsolete, so as people’s habits change, so will their devotion to cable and satellite change. And as services like Aereo, Netflix, Roku, and Apple TV build on the current viewing trends, a la carte TV may be a reality in the near future.

From an anecdotal POV, I’ve run into a handful of people recently who have cut the cord and depend on an ‘all-you-can-watch’ service or two to catch up on their favorite shows and movies. A larger group talks as though they’re going to cut it, only to be stopped by the unavilability of premium channels like HBO and Showtime. But the tipping point may be near. Me? I’m in the latter group. Between my Roku and my Apple TV, my family’s pretty happy with the VOD and streaming options. While there was a bit of consternation when SpongeBob exited Netflix and moved to Amazon, the vast majority of TV viewing, both adult- and family-oriented, is VOD these days. (Interestingly, my 12yo son is the primary consumer of ‘live’ TV, being a dedicated acolyte of the Disney Channel tweener TV shows. The most hardcore user of VOD happens to be my 8yo daughter, who navigates the several services we subscribe to like a pro.) Without the need to see shows as they air, since I can catch more efficiently later, the necessity of a cable/satellite provider becomes much less compelling. And since I get my news from Twitter, the WSJ(.com), CNN.com, TechCrunch and handful of other online sources, one of the final imperatives falls away. Gallup recently reported that majority of Americans do prefer to get their news via TV. This may be the one of the primary reasons why more households haven’t disconnected from cable/satellite. So, I’m nearly ready to make the leap. What’s holding me back? A binding service contract with my satellite provider, optimistically accepted when I upgraded to HD not long ago. The clock is ticking, tho. It won’t be long.