Faced with spectre of cord-cutting, broadcasting industry needs to innovate, experts say

Cable companies need to offer more time-shifting and place-shifting options to consumers to remain competitive against disintermediation and the trend of cord-cutting, experts say. “I think we as an industry have to really ramp up our efforts to meet customer expectations around time shifting and place shifting,” Rogers Communications Inc.’s vice-president of video products, David Purdy, said in an interview. Last week, the Canada Media Fund (CMF) told the House of Commons heritage committee that cord cutting is a growing trend—and one that is leading to a decline in growth for Canada’s cable and satellite broadcasting distributors. “Many Canadians are, in fact, migrating from cable and satellite to consuming content over the Internet,” Sandra Collins, the CMF’s vice-president of finance and administration, told the committee. Cable and satellite revenues continue to increase year-over-year, she said, but overall growth has diminished. Year-over-year growth for the industry dropped from 10 per cent in 2008-2009 to six per cent in 2009-2010, according to figures the CMF provided to the committee. Collins added that overall growth is expected to decline to two per cent this year. Traditional cable and satellite television distributors are trying to head off cord-cutting in the face of audience fragmentation and the Internet’s elimination of distribution channels, also known as disintermediation. Purdy said Canada’s incumbent cable companies should continue to innovate in the face of competition. In its third quarter results this year, revenue for Rogers’ cable operations increased by three per cent over the same period last year, from $773 million in 2009 to $797 million in 2010. The company’s digital cable subscriber base grew by six per cent over the same period. “While the news is comforting, it shouldn’t allow us to become complacent,” Purdy said. “We figured out some time ago that offering just linear television channels was not going to meet the needs of customers in the medium-to-long term.” Purdy added that the company has been proactive in meeting changing customer expectations with services like Rogers on Demand Online, the company’s online streaming content offering. “Most of our customers have told us that they want to come to a trusted, single-source provider for their entertainment needs,” Purdy said. “They don’t want to have to put together a combination of over-the-top and pirated content. If we can make it simple, easy, and offer them a fair price, they will stay with us.” The company recently added video rental downloads to its Rogers On Demand Online service, but critics say the portal generally offers a wanting catalogue. Carmi Levy, an independent technology analyst in London, Ont., said in an interview that the convergence of services, such as Internet, cable, phone and wireless, gives the incumbent television providers an advantage over services like Netflix. “Consumers don’t want to have to manage multiple bills at the end of the month. They want everything under one umbrella,” Levy said. He added that only tech-savvy consumers will want to experiment with multiple service providers. A survey released last month by Horowitz Associates Inc. in the U.S. found that young adults between the ages of 18 and 24 are more likely to cut back on their cable or satellite television subscriptions. The survey found that 39 per cent of U.S. broadband users watch television programming online or on a mobile device at least once a week. That figure was up five per cent from 2009. Television viewing online is a growing trend, but it doesn’t necessarily mean the end of traditional TV consumption. Adriana Waterston, Horowitz’ vice-president of marketing and business development, said in an interview that, so far, the impact of online video services is at the margins. She said over-the-top television has been most influential with adults between the ages of 18 and 24, who are most likely to replace their TV services with Netflix or Hulu. “But that’s not to say that they’re going to stay on that track,” Waterston said. “As they become heads of their own households and the parents of kids, we still feel that television as a central family entertainment device is going to continue to be very important.” The survey polled 800 broadband users and had a margin of error of plus or minus four percentage points. Another survey commissioned by the Cable & Telecommunications Association for Marketing (CTAM) in mid-October said that 84 per cent of Americans who watch online, on-demand TV shows and movies on their TV sets watch the same amount, or more, of scheduled television programming. The survey found that only three per cent of those who watch online programming on their TVs said they plan to cancel their subscriptions. Ninety-two per cent of those who watch online programming on their TVs also subscribe to a television service, the survey said. The study, conducted by Nielsen, surveyed 769 people aged 18 to 49 through an online panel. It had a margin of error of plus or minus two percentage points. “What the study revealed is that consumers are using Internet-to-TV viewing to supplement their TV viewing experience,” Char Beales, CTAM president and CEO, said by email. “And cable marketers are a savvy lot who are working to bring consumers the content they want, when they want it and where they want it—on multiple platforms, like on demand and mobile devices, among others.” Conventional television providers can also leverage live sports and news programming that does not transfer well to on-demand services. Their value is derived from being immediate or delivered in real-time. “There’s a huge chunk of video, and nobody is sure quite what it is, but it’s between 30 and 70 per cent, that will probably never significantly be needed to be streamed,” Duncan Stewart, director of research for technology, media and telecom at Deloitte Canada, said in an interview. Services like Netflix are also constrained by monthly bit caps and broadband networks that do not have the capacity to accommodate the mass adoption of high-quality, streaming video. “The networks do not exist today to allow even 10 per cent of Americans to watch streaming video in high definition between eight and 10 o’clock,” Stewart said. Stewart said Netflix only accounts for a fraction of one per cent of all primetime video content viewed in the United States. But a recent report by Sandvine Inc. found that Netflix, even with a small share of primetime viewing hours, accounts for 20 per cent of all wired downstream Internet traffic in North America. Levy said that over-the-top streaming video services are still in their infancy but will grow in popularity in the next few years. For now, conventional television will remain the primary choice for most consumers, he said. “We’re in the early stages of this transition and the mass exodus away from conventional television choices has not yet begun.” news@thewirereport.ca

Faced with spectre of cord-cutting, broadcasting industry needs to innovate, experts say

Broadcast | December 2, 2010

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us