Video Cord Cutting Threat is Overblown, Analyst Says

Some have noted a recent upsurge in investor interest in online video services, while others note a potential valuations bubble developing. You probably have to count BTIG analyst Richard Greenfield in the skeptical camp.

"The concept of being a so-called 'cord-cutter' sounds cool (leveraging technology) and,or,rebellious (fighting the entrenched multichannel video system)," BTIG analyst Richard Greenfield says. "But cool and rebellious do not necessarily translate into action."

While we are concerned about the long-term potential of "over-the-top" video, it is not a major threat to the cable and satellite industries over the next three to five years, he argues.

"Rather than blame the obvious headwinds, including a U.S. economy with housing going nowhere fast, high unemployment and consumer discretionary income falling, investors seem to have convinced themselves that concerned video cord cutting is becoming a real threat to the multichannel video entertainment industry.

At a high level, just about everybody would say the pressure is growing. Where observers disagree is about the immediate prospects. Greenfield says a survey of 1,300 consumers suggests the threat is overblown, at the moment.

Of the 1,200-plus subjects that subscribed to multichannel TV service, 37 percent say they have considered dropping their cable, satellite or telecom video service.

But when the 434 potential "cord-cutters" were asked if they would actually drop their subscriptions if it meant losing live sports events, missing out on live reality TV results shows and missing some of their favorite programming entirely (such as "True Blood" or "Weeds"), only 96 people (less than eight percent) would still consider dropping their service.

That would be in keeping with recent data on video churn, which suggests behavior at the one percent or two percent a year level.

But adjusting for the young-skewing, Web savvy survey panel, he concluded that "actual cord cutting risk is well below five percent.

Such surveys do not account for the reluctance of content owners to mess up their own revenue streams by making valuable content available in ways that damage current revenue streams. People might like the idea of buying and watching only what they want. But content owners are not going to allow that.

The desire to "cut the cord" might be there, but people will not be able to act on the impulse and still see what they want.

But some attitudes and values uiiWhat does a cord cutter look like? They are younger, watch less TV and are less likely to get HBO or Showtime, according to Greenfield.

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