We are now in the midst of a shift of how we consume video. When I was a kid, it was three broadcast networks and a handful of local independents. You had to watch TV shows at the time of their original broadcast.

Today, I watch Hulu and I stream Netflix, but I mostly watch cable TV, whether live, from my DVR or via VOD.

Some observers claim that a huge change is happening, with a significant number of consumers opting out of the current multichannel video system entirely (a trend called “cord-cutting”). If that’s true, we should see a drop in subscriptions demonstrating this exodus, but it just isn’t happening.

Big Scary Numbers

Recently, two surveys along these lines received a lot of coverage. And the word “surveys” is important, because these reports compile a small sampling of consumers’ past and probable future behavior,  as opposed to actually measuring consumer behavior over time.

The Yankee Group study claimed that, over the next year, one out of eight consumers planned to “cut off their pay TV services and use their PCs, gaming consoles and other connected devices to access video programming instead.” (Here’s a write-up from DSLReports and a post from one of the study’s authors.)

[EDITOR’S NOTE #1: It’s important to note that the Yankee study actually says that customers will cut or reduce their service, which is an important distinction. Trimming back by eliminating a DVR or cutting a premium service is not the same as canceling.]

The Convergence Consulting Group said in a report that cord-cutting was having an impact on multichannel video subscriptions.

[For 2008 and 2009] almost 800,000 US households had cut their TV subscriptions (to rely solely on Online, Netflix, OTA [over-the-air broadcast], etc). We forecast cord cutters will grow to 1.6 million households by year-end 2011.

Since there were 99.9 million multichannel video subscriptions at year-end 2009, this would be  less than one percentage point of the base, but this TechCrunch post from April 13th made it sound like a big deal.  Just this week, Daisy Whitney’s New Media Minute focused on the Yankee Group claims, as did this Denver Post article. From two weeks ago, here’s an NPR report that quotes the Convergence numbers.

[EDITOR’S NOTE #2: The Convergence report notes that 2 million subscribers were added in 2009 (up from 1.46M for '08) and they predict 1.8M additional subs for 2010 and 1.65M for 2011. By their own math, 2.6 million new subs - 0.6 million cutting the cord = 2.0 million net new MVPD subs.]

(By the way, this Retrevo Pulse Report made similar cord-cutting claims, but didn’t seem to get quite the same coverage as the Yankee and Convergence reports.)

Where Is the Subscriber Migration?

This certainly sounds ominous. “One in 8 to cancel this year!” “Cord-cutting to double over two-year period!” Run for the hills!

NCTA recently held its annual conference, The Cable Show. That week, SNL Kagan released a new report that said that “more people are paying for TV” (about 100 million to be specific). Comcast CEO Brian Roberts scoffed at the idea of a massive cord-cutting trend.

The month of May also brought us the Q1 financial reports from multichannel video providers. They must be feeling the pinch, right? Even a little bit?

Ten of the 12 largest video providers are public companies which represent more than 91 percent of the marketplace collectively reported that 591,000 MVPD subscriptions were added in Q1. Occupied households only increased by 139,000 during this period, so the bulk of the increase in subs occurred within existing households.

These figures fluctuate over the course of the year. For example, Q2 traditionally shows a dip, as students leave college for home and snowbirds cancel their temporary subscriptions. Looking at last year, SNL Kagan showed an increase of 1.8 million MVPD subscriptions in 2009. Kagan also said that 500,000 subscriptions were added in 2008 and nearly 2 million subscriptions were added in 2007.

If accurate, Yankee’s “1 in 8” prediction would mean that 12.5 million subscriptions would need to be canceled by next April (Although, this forecast includes service reductions, not just outright cancellations). If nothing else, I guess they’ll still be able to yell, “April Fools!”

During The Cable Show last week, one of my favorite panels was a discussion that industry analyst Leslie Ellis had with Chief Technology Officers from cable companies. These are, after all, the folks who actually have to implement technology over cable plant.

This year’s panel was called “Road Trip: Mapping Cable’s New-Tech Progression,” and it provided a useful view of forthcoming technology initiatives. One of the themes was about managing the bandwidth of the cable plant.

Hearing this discussion reminded me of a common complaint about cable’s broadband service: the asymmetric nature of the connection, with a higher downstream than upstream. Some ask why broadband is typically structured in such fashion. Some suggest that other countries’ broadband is better because it’s symmetric.

I recall a notorious (to me) 2007 post from David Weinberger:

I pointed out that the “10 megs down, one meg up” mentioned by one of the panelists assumes that we’re “consumers” rather than creators; we should have symmetric up and down.

So, I asked the panelists what they thought about this notion that symmetric bandwidth is the Holy Grail of connectivity.

Tony Werner, EVP & CTO of Comcast, said, “We’ve seen a lot more growth in our downstream than in our upstream in our last 12 to 24 months. But there is continual growth, both up and down and I think you’ll continue to see us increase both of them.” He noted that cable has a “tremendous capability to blast the upstream more [than DSL], as well as the downstream, if there’s a market for it.”

Mike LaJoie, Executive Vice President & CTO of Time Warner Cable, agreed about market demand: “The ways that we build networks and provision services are responsive to how customers use it. I have some customers that do need symmetric bandwidth. I have customers on the business side who need more downstream than upstream, more upstream than down. I have products available for any of those things.” But, he said, “Most residential customers are skewed about 3 to 1, down to up. It came a little closer to symmetrical a couple of years back, but now it’s scaling back the other way. Whatever customers want, we build.”

Dermot O’Carroll, Senior Vice President of Access Networks for Canada’s Rogers Cable, pointed out that forecasts of Internet traffic say that in the next year or two, 90% of that traffic will be video. With video, the vast majority of that traffic is downstream. O’Carroll also said that this is the trend of their customers’ usage: “We’ve looked at the asymmetry of our traffic and, over the last number of years, it’s become more asymmetric, not less.”

All of this goes to show that one of cable’s strengths is that we have very flexible resources that can be reconfigured to meet our customers’ needs. Our broadband offerings will continue to change over time, in response to the desires of the marketplace.

During The Cable Show last week, Light Reading’s Jeff Baumgartner interviewed NCTA President & CEO Kyle McSlarrow. FCC Chairman Julius Genachowski had spoken earlier that day (coverage here) and so Jeff asked Kyle about proposed Title II regulation of broadband. They also discussed the AllVid NOI and the CableCARD fix (see this previous post for background). Finally, they talked about the SOC waiver recently granted by the FCC.

Yesterday, former FCC Chairman Michael Powell led Marc Andreessen, Time Warner’s Jeffrey Bewkes, CBS’ Leslie Moonves, Comcast’s Brian Roberts, and Fox Filmed Entertainment’s Tom Rothman through a wide ranging, free flowing, and spirited discussion of the future of content at The Cable Show’s second general session.

To start the conversation, Powell asked Brian Roberts if cable should be worried about online video.  Roberts responded that every new medium presents a new opportunity, but said they all present avenues to deliver lawful content; the more opportunities for that, the better.

Andreessen (who shared details of his 36 port HDMI switch with 36 different inputs and a $4,000 per month commercial Internet connection) said that was the right way to look at the future – since every device is now expected to be Internet-enabled, and to allow content consumption.

Rothman chimed in to agree, but said that creates a requirement that content be compelling.  Without compelling content, you just have a bunch of devices to check baseball scores.  Rothman says the key to content online is two-fold.  First, the most important piece of content is good storytelling.  Second, that storytelling must be accompanied by a way to protect and monetize content.

The various models of monetization became a hot topic and Powell noted that customers may have different thoughts about the monetization process – so cable operators may end up fighting with consumers.

Moonves answered by noting that, for his company, there used to be one source of revenue – advertising – but now there are many more, such as syndication, retransmission fees, DVDs,  iTunes, Hulu, etc.  That presents more options to address the monetization question.

The introduction of the topic of advertising led Powell to ask what impact services like Facebook will have, since they present a new, and possibly competing, set of audience segmentation data.  Powell noted the industry no longer has the exclusive on audience data.

Bewkes suggested all the different entities must become partners in the sharing of audience data, and Moonves said one of the essentials is accurate eyeball measurement – and we don’t have that yet.

Andreessen suggest Facebook can be an enabler of content by providing data, and also by sharing content with friends.

Roberts said people may go to other providers  – not because the content is different, but because the experience is different or cooler.  As a result, it is incumbent upon cable to stay fresh and cool, and spend more time on the interface.

Asked what makes them nervous, the panelists suggested that the uncertainty of regulatory change was a great challenge.

Moonves joked, “Whenever they say it’s not about the money, it’s all about the money.”

In a discussion involving the people responsible for wireless strategies at America’s largest cable companies, one thing was clear – there is no single path they are taking to deliver wireless.  Cathy Avgiris of Comcast, John Bickham of Cablevision, Stephen Bye from Cox Communications, Frank Miller of Bend Broadband, and Mike Roudi from Time Warner Cable spoke today at The Cable Show in Los Angeles, on the panel “Spectrum of Possibility: Technology & Strategy for the Business of Wireless Communications.”

While most noted the agreement between industry players Sprint and Clearwire to provide mobile outside their service areas, there were differing business plans on display.  Stephen Bye noted Cox Communications plans to build its own wireless network using current 3G technology, but also noted the ease of upgrading to LTE in the longer term.  That approach puts Cox at odds with most of the other operators.

Comcast’s Avgiris, for instance, noted the different approach cable operators had taken to telephony years ago.  Rather than try to develop a circuit-switched network, many cable operators began pursuing a VoIP solution that would allow them to be competitive without high upfront costs.

Similarly, Avgiris said companies like Comcast and Time Warner are looking at Wi-Fi networks and dual mode smartphones to deliver their wireless offerings.

Cablevision’s Bickham discussed the deployment of their Optimum WiFi service in the New York area (see this earlier post), and the agreement between Time Warner, Comcast, and Cablevision to allow Wi-Fi roaming across each others’ networks (see this Multichannel News article).

All agreed that wireless would be a key part of the bundle of services offered by cable operators, but most spoke to the consumer benefits of that.  It’s no longer about bundling services just to save money, it’s about the experience.  When customers can use their mobile device as a gateway and player for their home based services, that becomes a powerful driver for consumer interaction.