The big new worry: Cord shaving
Never mind cord cutting. The move to skinny bundles could be real hurt.
February 29, 2016
Cord cutting, or canceling pay television services in favor of watching TV by other means such as online, has been a concern among media buyers for years.
But a new worry is emerging that may be an even bigger threat to cable networks.
It’s cord shaving, which involves the same concept – saving money by cutting back on pay TV – but a different execution.
With cord shaving, pay TV subscribers cut their subscriptions to the least possible number of channels. These so-called skinny bundles offer just a handful of networks that people really watch, instead of the 150 or so that come with a standard package, many of which don’t get viewed.
A new report from Pivotal Research Group finds that cord shaving is having a notable impact on cable networks’ household penetration, which posted a decline of 2.4 percent during the most recent Nielsen measurement period.
“We view the data as illustrative of a broader trend of ‘cord-shaving’ and subscriber interest in increasingly skinny bundles, which is a more significant threat to cable network owners than the less pronounced reality of ‘cord-cutting,’” writes Brian Wieser, senior research analyst at Pivotal.
Pivotal’s report notes that since 2014 there’s been an average 2 percent annual decline in household subscribers to individual networks.
That indicates cord shaving rather than cord cutting. The losses would be more severe if pay TV subscriptions were entirely abandoned.
It may be that people want to pay less but aren’t willing to part with pay TV entirely, since not everything you can get on cable is available online. For instance, you can’t watch cable networks’ content online unless you can verify that you’re a subscriber.
For people who want to be able to watch some things live, such as the NBA All-Star game, but are content to catch up with scripted programming after it hits Netflix a year later, cord shaving rather than cord cutting may be the answer.
The channels that are most likely to be impacted by shaving include those that are expensive for pay TV distributors such as Comcast, Dish Network or Verizon FiOS. For instance, ESPN charges more than $5.50 per subscriber, making it by far the costliest cable network.
If distributors can cut ESPN out of a bundle, that’s a lot less money they have to shell out, while still keeping subscribers.
Wieser says that channels owned by Disney, Viacom and Discovery appear to be impacted the most by cord shaving in the most recent Nielsen data. Fox, on the other hand, is holding up quite well.
“Cord shaving disproportionately impacts networks that are either particularly expensive or which distributors are relatively more willing to go without,” notes the report.
Of course, skinny bundles are not without their problems. The cable network owners have objected to them, as they rely on big bundles to ensure distribution of their smaller properties.
For instance, Discovery might demand that to get the popular Discovery Channel, its less-popular American Heroes Channel must also receive placement in a top-tier group, increasing its distribution.
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