Cutting the Video Cord Sounds "Good" to Some, But Isn't a Perfect Substitute

Around 80 percent of what most Americans watch on TV can be had for free, some would argue. Some of us would say that is a pretty big and overly-broad generalization. But keep in mind there is an 80-20 rule.

The 20 percent of programming people really cannot get "for free" includes what many would consider the "most valuable" programming.

Also, few people really seem to be willing to live with their video subscriptions, at the moment.

About nine percent of U.S. respondents to a Deloitte  survey say they have stopped buying video entertainment subscriptions from cable, telco or satellite providers, while another 11 percent report they are considering doing so.  Nine percent have cut the video cord

Cable providers lost about 1.77 million subscribers over the past year, similar to 1.76 million lost in 2010, according to Leichtman Research Group. But cable industry losses are virtually directly balanced by subscribers gained by telco and satellite providers.

The implication is fairly clear: video cord cutting remains largely a potential danger, not a current reality.

Telcos added 1.53 million video subscribers in 2011, compared to 1.61 million in 2010. Satellite providers added about 480,000 subscribers in 2011 and 930,000 in 2010. 2011 video market was stable, overall.

One complicating factor, Leichtman notes, is that growth traditionally has come from new housing starts. Since housing construction is down, the opportunity to grow the universe of subscribers is stilted. On the other hand, customer churn generally increases when people are moving. To the extent that people are not moving domiciles as much as they have in the past, that should contribute to lower churn.

What those figures do not shed light on is whether average revenue per accounts is stable, rising or dropping. One might argue that new features such as digital video recorder or HDTV are pushing average revenue up, while a desire to save money could be leading some customers to drop premium channels such as HBO.

Evidence seems to have been mixed in the third quarter of 2011. Comcast's basic video ARPU remained flat $72.7 during the period while broadband ARPU increased 2.2 per cent to $42.6. Telephony ARPU declined 2.4 percent from the previous quarter's $31.9.

DirecTV ARPU increased almost two percent from the previous quarter, reaching $92.20. Third quarter 2011 ARPU

Time Warner Cable had declines across the board in ARPU, with the sole exception of broadband.

DISH saw its ARPU decline two percent from the previous quarter, marking the company's first consecutive quarter ARPU decline since the recession in 2009.

AT&T U-verse and FiOS TV ARPUs continued to grow, however. FiOS monthly ARPU increased two percent from the previous quarter and U-verse's monthly ARPU was up 2.5 percent.

The larger point is that though service provider market share is changing, and average revenue per account is mixed, with no clear pattern, there is, at least according to Leichtman Research, no evidence that video cord cutting is happening on anything more than an insignificant level.  
But it always has been clear that some content is "more valuable" to consumers than others. Cable TV executives used to say that "nobody watches more than seven channels; the problem is that each person watches a different seven."
That is why distributors continue to argue that, for all its problems, a "bundled" approach still makes the most financial sense for consumers and suppliers. Cord cutting still minor