What Customers Want

Is Cord Cutting Accelerating?

The research firm eMarketer is predicting that cord cutting is accelerating this year at a pace faster than predicted by the industry. They’ve done surveys and studies and conclude that 187 million people will watch Pay TV this year (satellite or cable TV), a drop of 3.8% in viewership.

The drop in 2017 was 3.4%, but the big cable companies like Comcast and Charter hoped they could slow cord cutting this year by offering Netflix and other alternative programmers on their platforms. Perhaps that is working to a degree since cable companies are losing customers at a slower pace than satellite cable or the big telcos delivering cable on DSL, like AT&T.

eMarketer looks at the statistics in a different way than most others and predicts the people who will watch the various services – which is different than counting households. I suppose that some members of a household could stop watching traditional Pay TV while the home continues to pay for a subscription. They are predicting that the total number of people who will stop watching Pay TV will rise to 33 million by the end of 2018, up from 25 million just a year ago.

As you would expect, if Pay TV viewers are dropping, then viewers of online services ought to be increasing. They are predicting the number of viewers of the major OTT services as follows for 2018:  YouTube – 192 M; Netflix – 147.5 M; Amazon – 88.7 M; Hulu – 55 M; HBO Now – 17.1 M and Sling TV – 6.8 M. eMarketer says that in 2018 that 52% of homes now watch both Pay TV and an online service.

We know that Netflix’s growth has slowed and they added only 670,000 net customers in the US in the second quarter of this year and only 4.5 million worldwide. It appears, however, that the other online services are all growing at a faster pace as people are diversifying to watch more than just Netflix.

eMarketer credits a lot of the exodus of Pay TV subscribers to the proliferation of original content available. In 2010 there were 216 original TV series produced. That was 113 from the broadcast networks, 74 from cable-only networks, 25 from premium movie channels and 4 from online providers like Netflix. In 2017 that number has grown to an astonishing 487 original series. That’s 153 from the broadcast networks, 175 from cable-only networks, 42 from premium movie channels and 117 from online providers. A large percentage of the 487 series are now available online to somebody willing to track them down. These figures also ignore the proliferation of other content available online such as movies, documentaries, comedy specials, etc.

The proliferation of content from multiple sources is making it harder to rely on just one source of content these days. Somebody with a basic cable subscription is missing out on the 159 series produced by the premium movie channels and the online providers. Somebody cutting the cord and only using Netflix would be missing out on even more content. Some of the content generated by the broadcast and cable networks is available for free online, with commercials from places like Hulu. If a cord cutter wants to have access to a lot of the available content they’ll have to subscribe to multiple services – perhaps Netflix plus something like Hulu or Sling TV.

The eMarketer survey didn’t ask about the affordability of traditional cable – a factor that is at the top of the list in other surveys that have studied cord cutting. This particular survey concentrated on what people are watching without delving into the issues that drive somebody to cut the cord.

I don’t know about my readers, but I’m a cord cutter and I’ve already reached the point of content saturation. I probably have fifty items on my Netflix watchlist, and it would take more than a year to watch it all, even if I never add anything new. I have a similar list on Amazon Prime and a smaller list on Hulu. I never sit down to watch content without more options than I know what to do with. I have the luxury these days of watching content that fits my mood and available time – a real luxury compared to even a decade ago.

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Latest on the Internet of Things – Part 2, The Market

Yesterday I wrote about the security issues that are present in the first generation of devices that can be classified as part of the Internet of Things. Clearly the manufacturers of such devices need to address security issues before some widespread hacking disaster sets the whole industry on its ear.

Today I want to talk about the public’s perception of the IoT. Last week eMarketer released the results of a survey that looked at how the public perceives the Internet of Things. Here are some of the key results:

  • Only 15% of homes currently own a smart home device.
  • And half of those who don’t own a smart device say they are not interested in doing so.
  • 73% of respondents were not familiar with the phrase “Internet of Things”.
  • 19% of households are very interested in smart devices and 28% are somewhat interested.
  • There were only a handful of types of devices that were of interest to more than 20% of households: smart cars – 39%; smart home appliances – 34%; heart monitors – 23%; pet monitors – 22%; fitness devices – 22%; and child monitors 20%.

The survey highlights the short-term issues for any carrier that thinks they are going to make a fortune with the IoT. Like many new technology trends, this one is likely to take a while to take hold in the average house. Industry experts think the long-term trend of the IOT has great promise. In a Pew Research Center survey that I discussed a few weeks ago, 83% of industry technology experts thought that the IoT would have “widespread and beneficial effects on the everyday lives of the public by 2025”.

I know that carriers are all hoping for that one new great product that will sweep through their customer base and get the same kind of penetrations that they enjoyed with the triple play services. But this survey result, and the early forays by cable companies and others into the home automation and related product lines show that IoT is not going to be that product, at least not for now.

This is not to say that carriers shouldn’t consider getting into the IoT business. Let’s face it, the average homeowner is going to be totally intimidated by having more than a couple of smart devices in their home. What they will want is for them to all work together seamlessly so that they don’t have to log in and out of different systems just to make the house ready when they want to take a trip. And eMarketer warned that one thing that concerned households was the prospect of having to ‘reboot’ their entire home when things aren’t working right, or of getting a virus that would goof up their home.

And as I mentioned yesterday, households are going to want to feel safe with smart devices, so if you are going to get into the business it is mandatory for you to find smart products that don’t have the kinds of security flaws that I discussed yesterday.

The eMarketer report predicts that more homes will embrace IoT as more name brand vendors like “Apple, Google . . . The Home Depot, Best Buy and Staples” get into the business. And this may be so, but one is going to expect most such platforms to be somewhat generic by definition. If a carrier wants to find a permanent niche in the IoT market they are going to need to distinguish themselves from the pack by providing integration and customization to give each customer what they most want from the IoT experience. Anybody will be able to buy a box full of monitors from one of those big companies, but a lot of people are going to want somebody they trust to come to their home and make it all work.

But the cautionary tale from this survey is that IoT as a product line is going to grow slowly over time. It’s a product today where getting a 10% customer penetration would be a huge success. So I caution carriers to have realistic expectations. There is going to be a lot of market competition from those big companies named above and to be successful you are going to have to stress service and security as reasons to use you instead of the big names.

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