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Competition Everywhere

Competition Everywhere. During the past 70 years, Cable TV has evolved from its original purpose – providing isolated rural areas and those with poor TV reception access to the closest broadcast channels – to expanded viewing options for urban and suburban audiences.

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Competition Everywhere

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  1. Competition Everywhere • During the past 70 years, Cable TV has evolved from its original purpose – providing isolated rural areas and those with poor TV reception access to the closest broadcast channels – to expanded viewing options for urban and suburban audiences. • The number of channels quickly increased to hundreds, and with more content than even a couch potato could watch. The cost of subscriptions has increased and new streaming services attract more viewers. • Cable TV’s future is uncertain, but it still appears to have some life remaining and the strength to throw a few more punches to maintain, and possibly, increase its subscription base.

  2. Cords Are Still Being Cut • Leichtman Research Group reported during August 2019 that the leading pay-TV providers, which represent approximately 93% of the industry, lost approximately 1.53 million net subscribers during Q2 2019, or more than 3.5 times Q2 2018. • Satellite TV accounted for approximately 55% of the Q2 2019 losses; the top 7 cable companies, 30%; major telephone providers, 6.5%; and vMVPD services, (Sling TV, DIRECTV NOW, etc.), 7.8%. • Although eMarketer forecasts the rate of cord cutting to decrease significantly from 33.0% during 2018 to 11.6% during 2021, the cord-cutting total will increase during this period, from 32.8 million to 50.2 million.

  3. Cost Remains the Primary Issue • According to the TiVo Q2 2019 Video Trends Report (a survey of 5,340 adults 18+ in the US and Canada), 85.2% of respondents said they cut their pay-TV cord because of the cost, which substantiates the same findings from many other sources. • The “good news” is 12.2% of survey respondents said they were planning to cut the cord during the next 6 months, which is approximately 50% less than the 18.8% who said they would during Q2 2018. • Another upside from the TiVo report is the 83.3% of those surveyed who still had a cable/satellite service and, in general, they were more satisfied with the service while they were less satisfied with many other content sources.

  4. More “Cord-Nevers,” Too • A 2019 MRI-Simmons study revealed that “cord-nevers,” or those adults who have never had a traditional pay-TV service, were 12% of the US population, compared to 9% during 2017. • The cord-never syndrome has generally been attributed to young adults, especially those struggling financially. The median age of the 31 million cord-nevers is 33, with an average household income of $52,800. • That is not the income of a struggling young adult (although it may be for some), suggesting the choice of never subscribing to a pay-TV service when their budgets were tighter has persisted.

  5. Channel Surfing May Bring Cord-Nevers Home • The MRI-Simmons data also suggests that as cord-nevers age (and earn more money), a significant portion, or 27%, are planning to start a pay-TV subscription during the next 6 months. • Of those 8 million adults, 70% are expected to choose a traditional cable/TV subscription and the other 30%, which will generally be younger adults, will choose a vMVPD service. • Channel surfing was the top reason cord-nevers said they are considering a pay-TV subscription. Channel surfing pre-dates SVODs, AVODs and vMVPDs, and was, and continues to be, a defining characteristic of the original couch potato.

  6. The Cable Business May Be Better Than It Appears • Despite substantial losses of subscribers, the 10 million fewer pay-TV subscribers since 2011 is less than 10% of the 119 million TV households in the US. • Two factors may eventually start to reverse that trend. The first is the cost of niche/premium channels (SVODs, such as Netflix, and vMVPDs, such as Sling TV, so-called “skinny bundles”), although desirable, will eventually increase, too. • The second is the advent of addressable advertising technology will eventually generate more revenue per customer for cable than subscriptions.

  7. More Commercial Time • Cable TV providers are also responding to the loss of subscribers by increasing the total minutes of commercial time (and thus ad revenues), as they did from Q4 2017 to Q4 2018, or 11.8 to 12.0 minutes, a 1.8% increase. • Other than Fox, a March 2019 report from MoffettNathanson revealed all the other major network groups initiated this strategy, with A&E first, +6.5%; followed by independents, +3.3%; and Discovery Communications, +2.5%. • Despite the loss of subscribers, cable TV generated $55.4 billion in 2018 subscription revenues, a 3% increase from 2017, with satellite, $44.0 billion; online subscription video, $20.6 billion; and IPTV (Internet-Protocol TV delivery), $12.5 billion.

  8. Most Cable TV Viewers Are in Advertisers’ Sweet Spot • According to The Media Audit’s 2019 Aggregate Report of 66 markets, representing more than 143 million adults, 74.8% had a cable and/or satellite subscription and slightly more women, 51.8%, than men, 48.2%. • The two primary age groups are 25–44, at 32.6%, and 55–74, 29.1%. More than 80% (81.9%) had some college, a college degree or an advanced degree. • The range of household incomes was much greater, with 5 in double-digits. An income of $50K–$75K was the largest, at 20.7%, followed by $75K–$100K, 15.3%, and $35K–$50K, 14.4%.

  9. Viewership Trends • According to Nielsen’s Q1 2019 Total Audience Report, 72.9% of households had traditional cable as of June 2019, compared to 77.5% during June 2018. • vMVPD households increased from 3.3% to 5.3% and broadband-only households from 6.2% to 8.5% for the same period. • The Motion Picture Association of America’s (MPAA) 2018 Theme Report revealed 21% of the US population said they watched movies on pay TV every day, but 33% watched TV shows every day.

  10. The Content Battle • Since streaming services (Netflix, etc.) and other video sources (YouTube) have become popular, cable TV has had to compete with some deep pockets willing to invest billions in content. • Data from the MPAA Theme Report indicates 2015 was the last year basic and pay cable TV, combined, had more scripted, original series than broadcast and online services, combined (see the table on page 7 of the Special Report). • Basic and pay cable TV, however, account for the vast majority of total original series, when adding unscripted shows, children’s programs and daytime dramas to the scripted, original series totals (see the table on page 7 of the Special Report).

  11. Cable TV May Still Have a Bright Future • Comcast’s Q1 2019 TV Viewership Report (more than 17-million Comcast households in 65 markets), stated 65% of those households spent a majority of their viewing time on cable TV, compared to broadcast, 30%, and premium, 5%. • Nielsen’s August 2019 Local Watch Report reveals another positive trend for cable TV: the amount of time “streamers,” or those with subscriptions to streaming services, view content on cable TV channels – and it’s more than streaming services. • No doubt, emerging technologies, such as AI and 5G, will have a major effect on all video content sources. It will be exciting, a great learning experience and a future of new opportunities for large and small advertisers.

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