We have all heard about the large number of people who are “cutting the cord” and leaving cable. If we believe the hype, cable and broadcast TV will soon be gone, taken over by streaming programming. However, it is not all doom and gloom for the cable industry. And advertisers who think that they can cover a market with streaming video alone are mistaken. Here’s what is happening to cable TV.
What is OTT
For definition purposes OTT (Over-The-Top) is streaming video media service offered directly to viewers via the Internet. The video bypasses cable, broadcast, and satellite television platforms and goes directly to the home via high-speed internet access. OTT can be watched on a smart phone, tablet, computer or Smart TV, streaming devices like a Firestick and some gaming consoles. Connected TV or CTV is only watched on a Smart TV, Firestick or gaming console.
Streaming in 2020
The first quarter of 2020 saw the single largest number of Americans leave cable in our history. According to Wall Street analyst firm MoffettNathanson over 1.8 million people cut the cord in Q1. While it was expected to be worse in Q2, the actual number was 1.55 million according to Cordcutternews.com. And in Q3 that number dipped below 1 million. No, the cable industry was not happy, but the rate of defections has clearly plateaued.
Many OTT services are extremely well known, companies such as Netflix, Amazon Prime and Disney+ have tens of millions of subscribers each. Many people have both cable and one or more of these streaming services. We call them “cord-stackers”.
Often times the media quotes the hundreds of millions of people who use OTT. Technically, this is true. But it does not mean they only watch streaming video. Cord-stackers make up many of the OTT users. They are people who have found program(s) on an OTT platform and subscribe to the platform in addition to cable.
Who Is Cutting The Cord
Not surprisingly people who are keeping the cord are older. Younger demographics are far more likely to have cut the cord or at least stacked the cord. Currently, over 60% of America has cable. But that does not account for local or regional habits. According to November 2020 Nielsen data 86.5 % of the New York DMA subscribes to cable! This does not mean they only watch broadcast and cable channels. But, it is fair to assume they watch some.
In other words, knowing how many people have cable or OTT subscriptions is merely a top-line indicator. With cable and broadcast it comes back to ratings or how many people watch a program. In the case of OTT, we want to know how many people you can reach via a stream.
Broadcast and Cable work on the one to many principle. A program airs, and many people watch it at the same time. In the case of streaming it is a one-to-one relationship. Just as we do with other digital advertising we buy against demographics, behaviors etc. and then serve our ads at the time that person is watching. A young woman sitting in her house decides to stream a program. She sees advertising that is based on her demographic profile. Next door an older man decides to stream the same program. He will see different advertising based on his gender, demographics and behaviors. Ad delivery is customized to the viewer.
What is Happening To Cable TV
As with any advertising we always have to consider the advertising mix. In the old days, the mix might include Television, Radio and print. Today it can include OTT, cable and video preroll. All are forms of TV, based on Sight Sound and Motion. But each is delivered via a different platform and reaches different audiences.
It is very easy to conclude from media reports that a given media is “dying”. But what is happening to cable TV is similar to many traditional media, it is converging with digital. And good media planners will understand the need to use a media mix to best reach their target audience.
