THERE APPEARS TO BE LITTLE danger of conventional pay TV being bumped off its dominant perch among all media by over the top services. In fact, nearly all of North Americans will “continue to pay their pay TV subscriptions,” according to Deloitte’s annual technology, media and telecommunications predictions.
During the Ottawa presentation of the 2013 predictions, Duncan Stewart, director of research Deloitte Canada and author of the report, noted that the number of people who pay for television in the U.S. and Canada is not down 10% or 5%, it’s actually up about 264,000 people in the last year. But, he said, 2013 will see some cord cutting and looks to be the first year TV distributors see a decline in the number of subscribers.
Young people aged 18-to-34 are going to be those cutting the cord, state the predictions. A solid portion of TV viewers in this age category watch only about 23.7 minutes of TV per day, and therefore makes sense for them to ditch traditional pay TV. “Why would you pay $80 per month for pay TV when you watch a half hour a day? You won’t,” Stewart said.
There is an emerging class of consumers, however, that will never subscribe to conventional pay TV services. Dubbed the “cord-nevers”, these are generally young people who won’t opt for the cable or satellite TV option once they move out on their own.
There is an interesting result to consider when looking at the demographics of TV viewers, particularly since those who watch the least and appear most willing to cut the cord tend to make the most money, be the heaviest spenders, have the most education and be the most employed, noted Stewart. “If the people who cut the cord are younger, richer and better educated, the people remaining are older, poorer and less educated,” he stated. The demographic mix of the dominant TV viewer “is about to start changing.”
The Deloitte predictions also indicate the inability of independent over the top (OTT) services such as Netflix, Apple TV and Google TV to steal subscribers from the broadcast distribution undertakings (BDUs) means OTT will be dominated by the existing BDUs. The independent OTTs generally have “inventory” content, but if a viewer wants to watch an episode of a current program, they turn to their current BDU. Most of the big broadcast distributors have an online portal featuring their TV programming where viewers can turn to catch the latest episode of a wide range of programs.
“So our prediction is that by number of minutes of watched over the top, the existing distributors are in fact two of the three largest over the top solutions in every market around the world,” he said.
Spectrum crunch
Stewart also spoke about spectrum scarcity and the looming lack of wireless bandwidth needed to transmit an increasing amount of data services. He painted a rather dire picture of the situation in the U.S., but noted that Canada is perhaps a couple of years away from seeing a similar spectrum crunch.
To illustrate what may be coming to Canada in two years, he spoke about LTE network download speeds in Ottawa and compared them with speeds experienced in various U.S. cities. While Stewart was able to achieve 49 Mbps at a Starbucks on Hunt Club Road in Ottawa, colleagues in Boston get 12 Mbps to 15 Mbps and those in New York see 3 Mbps to 5 Mbps. Austin, Tex. fairs slightly better with speeds ranging from 5 Mbps to 7 Mbps.
During the Consumer Electronics Show in Las Vegas earlier this month, with an extra 180,000 ultra-connected tech-geeks in town, LTE network speeds were below those of a dial-up modem. “In Las Vegas at CES, the observed speeds were 50k. During peak times, it once took 40 minutes to send a text. That is what wireless congestion looks like,” he said.
There will be tools for U.S. users to ensure they get the speeds they’re paying for, Stewart noted.
The full list of predictions as well as the comprehensive report is available here.
