Well over a decade ago, we began charting the rise of TV cord-cutting.

In the beginning our models were crude, relying on failure to reach projected growth in TV subscribers and not decline.

Being among the first comes with privileges, but it also comes with slings and arrows.

Here’s an email we received in the early days from a media company executive:

“There is absolutely no credible evidence of multichannel cord-cutting in favor of online, Netflix or OTT video in the U.S. On a year-to-year basis, subscription to multichannel TV and multichannel TV with broadband in the home have grown. Nielsen data shows that the very small number of people who have cut the cord are predominantly very low-income and are far overshadowed by those who added cable and broadband despite the weakness of the economy, the decline in home ownership and continued high unemployment. We are seeing no evidence of systemic weakening of demand for multichannel television. TV viewing continues to grow and online viewing is still just 1% of overall viewership. Our own research shows that those who claim to have ‘cut the cord’ are no more likely to be Netflix subscribers or online ‘porters’ than the general population. Conversely, Netflix subs and those who claim to view online video OTT are heavy consumers of all video, including television, and are much more likely than the population to be multichannel video subscribers.”

Despite the critiques, we carried on. However, in 2014 it was becoming clear to us that our cord-cutter model had to change. Cord-nevers were becoming as large a phenomenon as cord-cutters, hence when young adults left the house they were no longer subscribing to TV as they had been before, so our model became a cord-cutter/cord-never model.

The U.S. TV base declined by 1.3 million TV subscribers in 2015, four times the decline of 2014. In 2016, there were 2.3 million losses, while 2018 reached 4 million and 2019 rose to 6.4 million. Based on our model, as of year-end 2019, 36% of U.S. households did not have a traditional TV subscription, double a decade prior.

Despite its perennial low operating income margins, Netflix has certainly proven the critics wrong. As of 2019 every major programmer was in the market with an OTT offer or planning to launch one.

With or without COVID-19, we had and have been forecasting mounting declines in U.S. TV subscribers, accelerated growth in cord-cutters/cord-nevers and formidable rises in OTT revenue for 2020 and beyond. Extending out forecasts to year-end 2025 from year-end 2019, demonstrates a decline of more than 50% of TV subscribers, over 40% of annual TV access revenue, while cord cutter/never households and OTT access revenue more than double.

No doubt these are devastating numbers for the TV business.

Nevertheless, and in respect to our critics from the early years, we are troubled by the recent quarter-by-quarter TV death-watch analysis. If COVID-19 has taught us anything, it is that conditions and variables change.

Blanket statements such as “cord-cutters are never coming back to TV subscriptions even if sports returns” make no sense. A return of sports would clearly help TV subscriber numbers, though their return would also help sports OTT numbers.

Further, we do not believe that low OTT prices are sustainable, more so if a significant portion of programming sales and advertising revenue are going to be destroyed by the decline of traditional TV access. In this regard, it still unclear what strategies programmers, OTT and TV access players will pursue going forward.

Without a doubt, parts of the decline of TV and the rise of OTT story have yet to be written. This is not a story set in stone, just like no one could have foreseen a year ago that we would be social distancing.

So we remain open to the possibility that there might be, as Grace Paley once wrote, “enormous changes at the last minute.”

Otherwise, based on our model’s trajectory, TV will be dead by 2030.

Brahm Eiley is the president of The Convergence Research Group, a research & consulting firm. All numbers from Convergence’s annual “Couch Potato Report” series.

Disproving perhaps once and for all the notion that virtual pay TV services are niche products targeted to broadband-only users, Leichtman Research Group says 43% of vMVPD users switched directly over from traditional cable, satellite or telco services.

LRG found that 17% switched to their current vMVPD platform from another virtual service, while 25% also have a linear platform. Only 15% of current live-streamed pay TV services were previously non-subscribers of any pay-TV product.

LRG based its “Internet-Delivered Pay-TV 2019” report based on online surveys with 6,715 U.S. households.

The research company also found that 71% of U.S. vMVPD consumers are in the 18-44 demographic. Overall, 16% of U.S. adults ages 18-44 subscribe to a live-streamed service like Sling TV, DirecTV Now, Hulu+ Live TV, YouTube TV or Sony PlayStation Vue. Only 6% of U.S. consumers 45 or older subscribe to a vMVPD.

Around 42% of vMVPD users are ages 18-34 vs. 26% for linear pay TV, LRG said.

Among all U.S. vMVPD customers, 73% describe themselves as very satisfied wi their service.

Around 93% of with vMVPD service also subscribe to one of the major SVOD platforms, Netflix, Amazon Prime Video and/or Hulu, compared to just 71% for traditional pay TV homes.

Notably, vMVPD users tend to be more mobile centric than customers of major SVOD platforms.

According to LRG, vMVPD users watch their service in their home 78% of the time, compared to 82% for HBO Now and 88% for Netflix.

“vMVPD services were first introduced about four years ago, and the market for these lower-cost/lower-channel pay-TV services is still growing and evolving,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “Consumers continue to experiment with the various vMVPD services, along with other traditional and streaming options, to find the best combinations of video content and cost.”

Offering another way to protect its video subscriber base by luring in new customers and fending off a growing cord-cutting trend, Charter Communications has recently introduced a new, in-home skinny-bundle offering called Spectrum Choice.

Per a web site dedicated to the new offering, it includes local broadcast networks, 25 Music Choice channels, and -- in an a la carte-like approach -- lets customers select 10 more channels to complete their package. Customers can also pay extra for premium add-ons such as HBO, Showtime, The Movie Channel, Starz and Starz Encore.

The site doesn’t provide pricing without an authenticated address, but TechHive, which took the service for a spin, said Spectrum Choice starts at $25 per month (after a discounted first month of $15) for the first two years, but with no long-term contracts. Customers can buy premiums for $7.50 per month each or $15 when all are bundled.

The service, the report added, is offered on mobile devices, web browsers, Roku players, and Xbox consoles. Spectrum Choice doesn’t require a Charter-supplied set-top box, but customers will need one if they want to add a DVR (Charter has yet to launch a cloud DVR that, for example, could work with Roku boxes). TechHive said that set-top box/DVR option would raise the cost by $20 per month, with recordings only available on the set-top.

As this is an in-home, in-footprint offering, Charter is delivering the service into the home via a managed IP connection (and not over-the-top via a public internet connection).

The service does support out-of-home rights to some channels for the linear TV and/or VOD assets. Rights to that out-of-home content, which would be accessible via the internet/OTT, varies. Per a chart that denotes out-of-home availability, bout live TV and VOD from Discovery Channel and Food Network, are supported, while only VOD is supported for A&E, and neither option (linear or VOD) is available out of the home for Disney Channel.

Though this is an IP-delivered streaming service, Charter stressed that Spectrum Choice is not a rebrand of Charter Spectrum TV Stream, another slimmed-down, no-contract offering that includes more than 25 channels, including major local TV networks, and starts at $22 per month, plus access to several premiums for $3 per month more each (or $15 for the Premium Pack). That offering is also offered via an app for iOS and Android mobile devices, Roku players and Roku TVs, Samsung smart TVs and the Xbox One.

RELATED: Charter Tests Sports-Free Skinny Bundle

Like Spectrum TV Stream, Spectrum Choice, a Charter official said, “is also targeted at customers who don’t currently purchase a video product from us. We continue to launch and test new services to better serve customer demand for more choice.”

The Charter official didn’t say when Spectrum Choice was launched, but CordCutterNews spotted it earlier this month.

These new, skinny TV services continue to emerge as Charter and others launch and experiment new ways to bring in new video customers, go after cord-cutters and present options for current pay TV subs that might be tightening their belts.

In Q4 2017, Charter bucked the trend by adding 2,000 residential pay TV subs, improving from a loss of 51,000 in the prior year period. 

With the finish line in sight, British long distance runner and Olympic gold medalist Mo Farah made one final sprint at the IAAF Diamond League finals in Zurich, Switzerland, last month. It was the last race of his long and distinguished track and field career and, coming up from behind, he won the last title in his storied career to wild applause.

NBC Sports Group televised Farah’s triumph to track and field fans live via its Track and Field Pass service, a $69.99-per-year, direct-to-consumer service that’s part of an emerging category of digital streaming sports subscription offerings that could threaten to sprint past traditional linear cable sports services to super-serve sports fans across the country.

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Traditionally, live sports programming lived in cable bundles that featured national sports networks like ESPN and FS1, as well as regional sports networks and a handful of general entertainment services.

But now, subscription digital sports services can showcase a huge roster — whether it’s NBC Sports Group offering packages with sports ranging from track and field to cycling to rugby; or Turner Sports kicking up a proposed OTT service geared to UEFA Champions League European football; or ESPN planning a direct-to-consumer service featuring 10,000 live Major League Baseball, National Hockey League and Major League Soccer games.

Getting Cord-Cutters in the Game
The new services seek to provide additional revenue to help sports programmers offset the high cost of rights while giving younger cord-cutting fans an opportunity to access content that’s not typically offered on linear sports channels.

“Before, if you were a cord-cutter or cord-never, you effectively said sports aren’t important to you because the only way to access U.S. pro sports content was through the pay TV network ecosystem,” fuboTV chief financial officer Joel Armijo said. “Now, in the [internet protocol] world, we’re moving toward completely personalizing that experience for a sports fans looking for that lean-forward kind of immersive experience.”

The sports industry has already taken several swings at the multiplatform, direct-to-consumer digital subscription model — all of the major pro sports leagues offer out-of-market packages of live games — while national and regional networks have offered marquee sports via TV everywhere platforms to authenticated viewers subscribing to the traditional cable bundle. As a result, audiences are increasingly viewing live sports content on phones, laptops and computers.

At the same time, younger viewers in particular are increasingly cutting the cable cord or choosing not to subscribe to cable at all, decreasing the pool of potential viewers who watch linear sports content. Pay TV providers lost about 976,000 net video subscribers in the second quarter of 2017, continuing a disturbing trend for cable networks, according to Kagan.

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The realities of the changing marketplace have pushed several linear sports channels, which are heavily reliant on distributor license fees and advertising dollars to offset high sports-content fees, to look for opportunities to generate revenue on alternative platforms. Last month alone, three major sports-media players committed to stepping onto the direct-to-consumer field within the next year:

● ESPN, which has recently suffered subscriber losses — its subscriber total was down 3.5% in its recent third-quarter earnings report — will launch a new service in 2018 that will mostly offer content not currently available on the linear channel. Offerings would include MLB and NHL content from BAMTech, which provides the technological backbone for the two leagues’ out-of-market streaming packages, and which is now majority-owned by ESPN parent The Walt Disney Co. While details of the service are vague, Disney chairman and CEO Bob Iger said during the earnings report that the launch of the direct-to-consumer service marks “an entirely new growth strategy for the company.”
● CBS Sports will launch a new OTT service later this year. It also launched a Showtime PPV app on Apple TV devices for the Aug. 26 Floyd Mayweather-Conor McGregor pay-per-view boxing match.
● Turner Sports — which distributes National Basketball Association games on TNT and Major League Baseball games on TBS — will launch a new streaming service based on its recent acquisition of UEFA Champions League and UEFA Europa League rights in 2018.

Sports media consultant Lee Berke said the recent OTT sports service announcements mark a shift in the traditional cable bundle’s virtual stranglehold on the category as viewers migrate to more multiplatform viewing.

“I don’t think the bundle or traditional cable is going away, but it’s shrinking, and the days of 80% to 90% penetration of cable services in homes are gone,” said Berke. “The key is that [sports networks] need to be in [the digital] space in an aggressive way and take a new look at their programming rights to see how best to divvy them up in an innovative range of approaches that meet the needs of new generations of viewers that may think their televisions are their phone, laptop or tablet.”

NBC’s Niche Play
Still, cable sports networks have to walk a fine line in trying to generate new digital revenue streams with direct-to-consumer services while not syphoning away cable subscribers from its linear cable channel offerings. NBC Sports Group has tried to have the best of both worlds by launching several direct-to-consumer services under its NBC Sports Gold service featuring niche content and international sports.

The company’s Cycling Pass, Pro Motocross Pass, Track and Field Pass, Rugby Pass and Premier League Pass all offer content that isn’t available on broadcaster NBC or cable sports network NBCSN, said Rick Cordella, executive vice president and general manager for Digital Media for NBC Sports Group.

While NBC Sports Group remains a big supporter of the existing cable ecosystem, the advent of new digital technology, combined with viewers’ willingness to watch content on multiple platforms (NBC’s Sunday Night Football drew an average of 600,000 unique digital viewers to NBCSports.com last year), represents a chance to deliver content to underserved groups of fans, Cordella said.

“What I think has happened is, the technology is now available to deliver these products, and the acceptance of that technology allows you create offerings like NBC Gold that weren’t possible years ago,” Cordella said. ”People are willing and open to watch content this way.”

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A huge question looming over this shift is whether enough underserved sports fans would be willing to pay anywhere from $10 to $70 to watch live sports fare on their phones and laptops. Cordella wouldn’t provide specific subscriber numbers for any of the five OTT sports services, but he said the numbers have “exceeded expectations.”

OTT provider fuboTV is one player that’s skeptical that sports alone will draw enough subscribers to change the game in a video-streaming marketplace dominated by entertainment services such as Netflix, Hulu and Amazon Prime Video. A mix of quality sports content and entertainment-based fare will attract a broader audience and score more revenue dollars, CFO Armijo argued.

FuboTV’s 70-plus channel Fubo Premier bundle sells for $34.95 and includes 35 channels that feature sports content, including soccer-heavy beIN Sports, fuboTV Network, Eleven Sports and most recently, Pac-12 Network, to go along with FS1, Golf Channel, Olympic Channel, NBCSN, CBS Sports Network and NBA TV. Also part of the bundle are a number of news and entertainment-based channels including Lifetime, Fox News Channel, USA Network, Univision, El Rey Network, HGTV, Hallmark Channel and History.

“We will continue to work to really super-serve sports fans and that’s very core to what we do,” Ben Grad, fuboTV’s North American head of content strategy and acquisition, said. “At the same time, there’s no one-size-fits-all model out here. We’re confident with our approach of being able to very well serve a number of customers in the marketplace with both sports and entertainment programming.”

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Still, NBC’s Cordella said a sports-only OTT service is an easy sell to fans hungry to watch their favorite sport. “One of the good things about sports is the fact that this is a known entity — you’re tapping into a built-in fan base that already exists,” he said. “When you take a particular soccer game and say, ‘It’s this team versus that team,’ you know exactly what you are getting, as opposed to entertainment services where you have to explain what the content is and why it’s different and better than what your cable subscription already has.”

It could be a while before standalone OTT services replace pay TV providers, Berke said, but companies that don’t explore the direct-to-consumer marketplace do so at their own risk.

“I don’t know if it’s the end game, but it is a necessary step,” Berke said. “It doesn’t mean that that’s the only way consumers will be watching sports in the future, but it means that you need to have a substantial presence there if you’re going to keep yourself relevant for new viewing options. You have to be able to reinvent yourself for each new generation.”

It seems the industry is inundated with study after study that implies a battle of good versus evil has developed between traditional linear cable viewers and young, cost conscious cord-cutters and cord-nevers.

There’s no denying that fewer viewers are subscribing to cable packages -- the U.S. pay TV industry just had its worst-ever Q1, losing 762,000 video subs during the first quarter, according to research company MoffettNathanson -- and that viewers are streaming more than ever. A recent Horowitz Research "State of Pay TV, OTT and SVOD 2017" report said seven out of every 10 TV viewers stream at least some of their content through digital subscription video-on-demand services.

Nonetheless, viewers' growing penchant for streaming content doesn’t necessarily equate to a full-blown rejection of the traditional cable bundle. Rather, Horowitz Research senior vice president of insights and strategy Adriana Waterston said, services such as Netflix and Hulu are giving viewers a more seamless and user-friendly way to view programming.

A majority of viewers still want access to the live news and sports programming that the traditional cable bundle provides, along with the binge viewing-friendly digital services: 57% of consumers have both an SVOD service and a pay TV subscription, according to Horowitz’s report, which was presented during the Annual Cultural Insights Forum June 6 in New York.

Waterston pointed to growing interest in new virtual MVPDs such as Sling TV, DirecTV Now and YouTube TV that offer consumers the best of both worlds – bundles of live TV channels at various price points that can be accessed on mobile phones, tablets and computers, as well as the big screen TV.

Three in 10 TV viewers – and 40% of millennials -- would consider subscribing to one of the new vMVPDs, according to the Horowitz report.

“A new narrative is emerging – one that doesn’t pit people who are willing to pay for pay TV against those who cord-cut,” Waterston said. “The new narrative is about those who choose to stay with a traditional provider against those who might choose to go with a new provider offering comparable services in a new way. They all want the perks of traditional providers, but on their own terms.”

A new study on the viewing habits of millennials has yielded the same results that most industry observers already know and fear: 18-to-34-year-olds are very comfortable accessing video content in a cord-free world.

Market research company GfK MRI’s Survey of the American Consumer shows that one-third of millennials either have never paid for a cable, satellite or fiber-optic TV service or have cut the cord after initially subscribing to cable, nearly twice the 16% of baby boomers who are cord-cutters or cord-nevers.

OTT services like Netflix, Hulu and Amazon will most likely welcome the news that a sizable portion of millennials aren’t in the habit of paying a monthly cable bill, thinking that those eyeballs — and subscription fees — will migrate to streaming services. Indeed, the GfK MRI survey reported that untethered millennials spend 65% of their viewing time streaming content via a TV set or other device.

But as the old axiom goes, be careful what you wish for. The same millennials who don’t want to pay for cable may also find ways to not pay for the streaming SVOD services they watch.

A spring 2016 IBM Cloud Video survey reported that nearly half of millennials have used another person’s password to access an online video platform like Sling TV or Netflix, while 42% said they’ve shared their own personal password with a family member. While the numbers may not be catastrophic for the streaming services — Netflix CEO Reed Hastings said during CES that he has no problems with the service’s subscribers sharing their passwords — OTT players shouldn’t ignore the behavior either.

With most streaming services providing few limits on the number of users per account, a generation that has no experience with paying for video content on any platform could be emerging — one both cable distributors and OTT services will depend on for revenue in the near future.

The percentage of U.S. broadband homes that use only antennas to receive TV has risen steadily in recent years, according to a new study from Parks Associates.

That number has climbed to about 15% amid a trend that has seen a drop in pay TV subscriptions paired with an increase in Internet-only video subscriptions, the research found in the study, 360 View: Entertainment Services in U.S. Broadband Households.

Those numbers could bode well for OTA-OTT combo products, such as the new Air TV Player and Adapter from a subsidiary from Dish Network, that cater to cord-nevers and cord-cutters.

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Per the study, 81% of U.S. broadband homes still have a pay TV subscription, but only one-third of them are “very satisfied” with the service. Notably, 31% of U.S. broadband homes take multiple OTT service subscriptions, Parks Associates said.

Additionally, twice as many subs downgraded their pay TV service (12%) than upgraded it (6%) in 2016, and only half as many cord-nevers adopted pay TV in 2016 (2%) versus 2015 (4%).

“Pay-TV subscriptions have dropped each year since 2014, falling to 81% of U.S. broadband households in Q3 2016,” Brett Sappington, senior director of research at Parks Associates, said in a statement. “Several factors have played a part in this decline, including growth in the OTT video market, increasing costs for pay-TV services, and consumer awareness of available online alternatives.”

But pay TV players are adapting, he said, adding that it’s still a challenge for consumers to aggregate and discover their favorite content and view it on their preferred screen.

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Some 10 months after closing its $48.5 billion purchase of DirecTV, AT&T has introduced a flurry of products aimed at exploiting its position as the largest pay TV service provider and the second-largest wireless communications company in the U.S. It’s combining video, broadband and wireless offerings in a variety of packages, including deep discounts for wireless service, mobile video and unlimited data plans. It has also raised some eyebrows with a plan to migrate U-verse TV subscribers to DirecTV, a move some see as a factor in the steep subscriber declines in its wireline business.

Most recently, AT&T formed a joint venture with former Fox chief Peter Chernin called Otter Media for long- and short-form content with three over-the-top services — DirecTV Now, DirecTV Mobile and DirecTV Preview — expected to debut later this year. It’s beginning to seem like investors will need a scorecard just to keep track of the latest movements in the phone company’s lineup.

AT&T Entertainment Services senior vice president of strategy and business development Tony Goncalves spoke with Multichannel News senior finance editor Mike Farrell about AT&T’s strategic direction and plans to navigate the evolving world of voice, video and data. Edited highlights follow.

MCN:It seems that DirecTV’s role in AT&T Entertainment has changed even in the short time since the merger was completed. Can you talk about that?

Tony Goncalves: I think, at a macro level, there are shifts in the value chain happening. The definition of a distributor is changing, but at the macro level our video strategy is pretty much intact. We were pretty overt, we were moving rather aggressively from a satellite-only and an IPTV-only video provider to one that would provide high-quality video to consumers, regardless of the connection. The OTT announcement we made earlier last month — ubiquitous delivery of video content across managed and unmanaged networks is our approach. One thing we bring to the table for both the consumer and the industry is the fact that we’re a network and connectivity company at heart. So we should be able to move the bits pretty efficiently between the origination and the end point for the consumer.

MCN:Right after the deal closed, there was some really deep discounting for handsets and a push toward pairing video service with cellphone service. Now, you’re moving toward an OTT product. Was that always the intention or is it more of a reaction to market forces?

TG: The intention had always been to build from what we had as a unified company and create points of differentiation wherever you possibly could, with mobility clearly being an area where we could employ some differentiation. What you saw was an out of the gate, highly promotional kind of approach. And what you subsequently saw earlier this year was [combining] unlimited data when you combine AT&T mobility on DirecTV. The third prong was the announcements on OTT. Underlying all of that is a video platform that will ultimately be delivery-agnostic — managed and unmanaged networks, WiFi or LTE, IP or satellite. The intent has always been, you get to a point where the platform is flexible and nimble and expands beyond the 26 million households we’re in today.

MCN:Millennials supposedly don’t watch TV, they watch shows on whatever device they happen to have nearby. Is that what you’re doing with the OTT service? Is it the first step in a series of products that consumers will use as their life situations change?

TG: Our OTT strategy is two-pronged. On one side, it’s a catch-all type of product. There are folks that are leaving the ecosystem that really still value the bundle, and the bundle has just gotten a bit out of reach. Our DirecTV Now product is intended to be a product that folks who are leaving the ecosystem, yet still value the premium content, can subscribe to rather easily. It’s pay TV as an app. They can subscribe rather quickly and cancel rather quickly. But we’re investing less into those consumers because we’re not rolling trucks or putting set-top boxes into their homes. On the other side of what we announced on OTT, which is DirecTV Preview and the mobile-specific products, it is trying to pull in some of those “cord nevers” that tend to be younger and present them with premium content from the more premium services. Over time, yeah, we do believe that at a certain life stage, cord-nevers will make a decision to buy more. And we’re in a unique position if we do this right to be able to establish a relationship with those customers.

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MCN:You have been migrating U-verse TV customers over to DirecTV. Once that is complete, will you still have a wire into the home? Will U-verse wireline broadband still be important, or do you see that eventually moving to fixed wireless?

TG: Fixed-line broadband is very, very important to us. We’ve committed as part of the conditions of the merger to build 12.5 million fiber households. There is a tremendous amount of investment that is traveling down the fixed-line broadband path. As far as fixed wireless, we are deploying some fixed wireless, largely in rural areas. As mobile networks evolve and we get into this IP era, there will be an opportunity to unify the broadband approach. We haven’t been overly specific as to what our plans are there. But to answer your question very directly, fixed line is very, very important. We’re putting a lot of fiber in the ground and we don’t intend to pull back at all.

MCN:So there will always be a line into the house?

TG: Yeah. How that line gets there is definitely evolving. It used to be twisted-pair copper that went through a central office and got distributed, then it became fiber to the neighborhood and now we’re at fiber into the home. There will be what I call a collision of wireless and wireline at some point. It’s hard to predict when [and] to what extent we’ll use it. We’re going to do whatever is more cost-efficient and delivers the best experience to the consumer.

SIDEBAR: Streaming Meemies

Beginning in the fourth quarter of this year, AT&T will make streaming video available in three separate packages for consumers:

DirecTV Now: On-demand and live programming from most of the networks available on DirecTV, plus premium and add-on options

DirecTV Mobile: Mobile-first experience for premium video and made-for-digital content for smartphones, regardless of wireless service provider

DirecTV Preview: Free, ad-supported service featuring some of the quality programming available on DirecTV, including the AT&T Audience Network and millennial-focused content from Otter Media

Source: AT&T

SIDEBAR: Sub-Traction

DirecTV net new-subscriber growth has been on the rise in the past few quarters, just as AT&T’s U-verse customer base has declined sharply. (In thousands)

Q1 2015           Q2 2015             Q3 2015         Q4 2015        Q1 2016

DirecTV . . . . . . . . . .  60 . . . . . . . . (133) . . . . . . . . . 26 . . . . . . . . . 214 . . . . . . . . 328

AT&T U-Verse . . . . . 49 . . . . . . . . (23) . . . . . . . . . (92) . . . . . . . .(240) . . . . . .  (382)

Source: Company reports

RELATED:Pay TV's 'New Normal': Brahm Eiley on Convergence Consulting’s ‘The Battle for the North American Couch Potato’ Study

Canadian research company Convergence Consulting Group estimated that 1.13 million U.S. TV households cut the cord in 2015, about four times the pace of 2014, with another 1.11 million expected to cancel their pay TV subscriptions in 2016 as over-the-top and mobile services continue to grow.

In its annual research report – The Battle for the North America Couch Potato – Convergence said that although pay TV revenue rose 3% in 2015 to $105 billion and should  increase another 2% to $107 billion in 2016, it was far below the pace of OTT services. Convergence estimated that OTT revenue increased 29% to $5.1 billion in 2015, rising another 30% to $6.7 billion in 2016.

The pay TV universe continued to shrink – the report estimates that there was a decline of 1.13 million U.S. TV  subscribers in 2015 (compared to 283,000 in 2014). Cord never/cord cutter households – those that do not subscribe to a pay TV service – also were on the rise to 24.6 million in 2015 from 22.5 million in 2014. Convergence estimates that 26.7 million households (an increase of 2.1 million homes) will join the cord-never/cord-cutter ranks in 2016.

Content spend increased for both traditional and online networks in 2015, with Convergence  predicting traditional networks spent about $53.1 billion on content in 2015 (up 8%) while new players like Amazon, Apple and Netflix spent an estimated $7.1 billion in 2015 up 27% over the prior year. Increased spending is expected to continue for both sectors – Convergence estimates traditional networks will shell out $57.2 billion for programming in 2016 (up 7.7%), while non-linear providers will spend $8.7 billion this year, up 22.5%.

About 20% of pay TV customers could sever the pay TV cord in the coming year as frustration with the lack of choice and control over their entertainment packages could reach a head, according to a new study by research firm PricewaterhouseCoopers.

The study – Videoquake 3.0: The Evolution of TV’s Revolution – took data from a survey of more than 1,200 consumers, focus groups and social media listening.

The survey found that pay TV is losing its grip – the number of consumers that said they could see themselves subscribing to cable in the following year dropped from 91% in 2014 to 79% in 2015, which PwC says implies that about one-fifth of consumers could ditch their cable subscription in the next year.

“Consumers’ relationship with video content is fundamentally changing – and the shift shows no signs abating,” PwC said in the study, adding that content providers need to rethink their business models to remain viable. That could include repositioning the bundle to better reflect ala carte demands; redefine how they measure audiences to gauge consumer behavior across all platforms; focus on improving the user interface to allow customers to find what they want when they want it.

According to PwC, 79% of U.S. consumers subscribe to some form of pay TV, but of those subscribers, 23% said they engaged in cord trimming in the past year. About 16% of those surveyed said they unsubscribed from pay TV service in the last 12 months and 5% said they were cord-nevers and never subscribed to pay TV service at all.

The study also found that while the average subscriber receives 194 channels, they regularly watch just 17 channels.

PwC says consumers are clamoring for control – 56% said what would get them back on the pay TV bandwagon is the ability to customize their video packages to include only the channels they want. And PwC said that sentiment was not exclusive to cord-cutters – about 45% of current pay TV customers said they most preferred an a la carte package of channels they could customize themselves. 

Consumers, especially younger ones, are watching that content on multiple screens. According to the survey, 77% of 18-to-24 year olds are accessing TV content from the Internet and increasingly on mobile devices, PwC said.

OTT services also are growing, with 78% of consumers surveyed saying they subscribe to at least one OTT service. Among pay TV customers, 70% said they subscribe to a streaming service as well.

While on-demand or OTT streaming services are appealing to consumers, there’s no single catch-all solution, PwC said in the study. Netflix leads the OTT pack—nearly two out of three Americans have a Netflix subscription—but 52% of Netflix subscribers also subscribe to cable, and 55% also subscribe to at least one other OTT platform. Among Hulu subscribers, the overlap is even greater – 91% of Hulu customers subscribe to at least one other OTT platform—more than double the number of Hulu subscribers who also subscribe to pay-TV. Amazon Prime subscribers have a similar profile—79% subscribe to at least one other OTT platform, and 53% subscribe to cable. According to PwC, this means that in the battle for market share, OTT services are a threat to cable, but not necessarily to each other.

Following a trial period that ran several months, Comcast has gone live with Stream TV, an IP-based skinny bundle service for broadband-only customers that features the major broadcast networks, HBO, access to “thousands” of VOD titles and the MSO’s Cloud DVR service.

The rollout covers the Greater Boston Region, which includes eastern Massachusetts, New Hampshire and Maine.  Comcast expects to make Stream TV available across its footprint by “early 2016.”

Comcast introduced Stream TV in July, and at the time said it expected to debut the service in Boston in late summer and then bring it to Chicago and Seattle.

Comcast is delivering Stream TV via its managed IP network (meaning it's not a pure "over-the-top" service) to Web browsers, smartphones and tablets via the MSO's Xfinity TV app. While the offering does provide access to some TV Everywhere apps that work on TV-connected platforms, the core Xfinity TV app is not currently offered on devices like Roku players, the Apple TV, and Amazon  Fire TV, making it a mobile-first type of offering. 

Update: A Comcast official said the Stream TV service support two concurrent video streams per subscriber. The Cloud DVR component lets Stream TV subs record 20 hours of programming. According to the fine print on the new site dedicated to Stream TV, it appears that Comcast is targeting its next launch at Chicago. 

Comcast said Stream TV, which does not require a costly truck roll is offered on a contract-free basis, includes the broadcast TV fee, plus local taxes and fees, which vary by market.  To prime the pump, Comcast is offering the first month of Stream TV for free.

Targeted to cord-cutters and young, millennial audiences, Comcast’s new offering emerges at it and other MSOs look to turn the tide on video subscriber losses. Even without Stream TV, Comcast’s video metrics have been improving. In the third quarter, Comcast shed 48,000 video subs, nearly half the 81,000 it lost in the prior year period and marking its best Q3 in nine years.

Comcast is the latest MVPD to branch out with skinny bundles and offerings tailored for the cord-cutting and cord-nevers crowd.

Dish Network has Sling TV, which offers a core package for $20 per month that does not include broadcast TV stations. Time Warner Cable has pushed ahead with an IPTV trial in New York City, Mt. Vernon and New Jersey that relies on Roku players and delivers three different video service tiers to customers who take the MSO’s residential broadband service.  Charter is  testing a service called Spectrum TV Streamthat starts at $12.99 per month, and Cablevision Systems has created a set of tiers geared for cord-cutters.

"We want to make ordering and accessing Stream TV as simple as possible for our customers and let them start watching favorite content as quickly as possible," said Matt Strauss, EVP and GM, video services at Comcast Cable, in a statement. "It's an exciting time to be a TV fan – there is more quality content than ever and seemingly limitless ways to keep up with all the shows and movies people are talking about. We'll continue to experiment by creating offerings like Stream TV so that users can choose the service that works best for them."

"Interested Xfinity Internet-only customers can immediately start enjoying the service by using the Xfinity TV app or the online portal.  Stream TV is yet another choice for consumers to enjoy entertainment on their terms,” added Steve Driscoll, VP of sales and marketing for Comcast’s Greater Boston Region.

Just a couple of years ago, over-the-top (OTT) service was being called “an attractive new gateway to reach TV viewers.” But, today, it seems that almost everyone is using OTT services – streaming of video content over the Internet without the involvement of a multiple-system operator in the control or distribution – either to supplement traditional cable TV services or sometimes as a total replacement for pay TV.

A recent Parks Associates survey found that 7 percent of broadband households, or 8.4 million households, in the U.S. subscribe to at least one OTT service but not to a pay TV service. This demographic includes both “cord cutters” – former pay TV subscribers who have opted for OTT streaming services instead – and “cord nevers.” Cord nevers are the younger college generation raised on social media and Netflix, who are used to any content, any time, on any device. Viewers in this generation often decide not to sign up for pricey cable packages when they move into their first apartment.

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While the “cord cutting” impact on the pay TV industry can be dismissed as minor, the Parks Associates survey also shows that 57 percent of U.S. broadband households now subscribe to an OTT video service. This indicates that “cord shaving” has now become a mainstream phenomenon. When OTT supplements traditional pay TV, subscribers are likely to cut back on existing pay TV services as they evaluate their entertainment options.

A Tipping Point in Terms of Revenue

At the NAB conference earlier this year, SeaChange CEO Jay Samit told audiences that the cable industry has already reached a “tipping point,” which he defined as cable companies making more money by delivering video through broadband rather than through their traditional systems. In fact, he stated that Comcast was just reaching this point of making more money from its broadband Internet services than it does on video.

As the industry reaches this tipping point where streaming OTT content has become the norm, new approaches are needed to deliver the huge volumes of Internet video and other OTT content demanded by consumers.

Local Content Delivery Enables Effective OTT Delivery

When OTT content has to be delivered across the Internet from the original source each time a user requests access, this is no longer an effective approach – even when aided by a global CDN. This model causes network congestion, which makes interrupts video delivery.

The seminal Conviva 2015 viewer experience report demonstrates that 28.8 percent of all Internet streams in 2014 experienced buffering while 58.4 percent suffered from degraded video resolution, with both metrics deteriorating as compared with 2013.

To be truly effective, the most popular content must be brought closer to end-subscribers and delivered locally.

A local approach to content delivery offloads the network to ensure a better Quality of Experience (little or no buffering and support for high video resolution) and significant costs savings for the network operator. With a local content delivery model, consumers gain an improved viewing experience, which translates to increased consumer satisfaction with the broadband service provider.

Alan Arolovitchis the chief technology officer for PeerApp, a provider of an open content delivery platform for mobile, telco and cable operators that boosts their networks to deliver OTT content to end-customers with high QoE and efficiency.

TiVo’s plan to create a service along the lines of Aereo, but “done legally and better,” as TiVo CEO and president Tom Rogers put it recently, is still murky, though the company is expected to reveal all at an event in San Jose sometime in July.

In a brief interview Wednesday, Rogers wouldn’t let the cat out of the bag, but dropped some hints suggesting that whatever TiVo does have in mind, expect it to build on what it’s started with the Roamio OTA, a new DVR model sans CableCARD slot that's targeted to cord-cutters, enabling them to combine over-the-air TV with over-the-top video and essentially create their own video service bundles.

“We haven’t been very specific about it,” Rogers acknowledged, “but it will certainly build on what we currently are doing in the OTA space, fully recognizing that there are…consumers out there that are going beyond where Aereo was when it came to recording network signals.”

Notably, TiVo acquired only Aereo’s trademarks and customer lists for about $1 million in March following a bankruptcy auction. Other parties snapped up Aereo’s patents and some of the now-defunct company’s equipment and technology. 

We’ll know more this summer, but I think that scenario makes it unlikely that we’ll see TiVo build and operate its own antenna arrays, a la Aereo, to capture OTA signals and redistribute them via the Internet.  Given Rogers’s most recent comments, I’d expect the coming product to include expansions and enhancements to the Roamio OTA, perhaps with a cloud DVR component.  

The Roamio OTA is starting off as a retail product, but Rogers also talked up how it is also being positioned to help MPVDs counter the small but growing cord-cutting threat. 

“Increasingly, we’re hearing from cable operators on this who say, ‘Hey, we need to have some way of relating to the broadband only subs that are not taking our video package…and provide us with a way to do that with a combination of a device and an interface where we as operators don’t have to bear programming costs,’” Rogers said. Cablevision Systems, which is not one of TiVo's MVPD partners, has already begun to market specialized cord-cutter packages. 

That approach, Rogers said, gives MVPDs “a nice way of allowing people to get network signals without their paying retransmission consent in a nice way for consumers to integrate whatever streaming services they want that don’t involve payment by a cable operator for programming.”

Frontier Communications is the first and only MVPD so far to announce plan to market the Roamio OTA to broadband-only subs, but expect more to join the club.  Frontier president and CEO Dan McCarthy told an investors conference last week that a trial with TiVo is underway.

“We have some interesting discussions going on with various operators on that front,” Rogers said. “I think they’re quickly concluding that it’s not a question of encouraging cord-cutting, but that there are people who are going to not want the video package but are going to want broadband. And they [the operators] want to be able to maintain as close relationship as they can.” 

Following up on a product plan announced last month, Microsoft said Wednesday that an over-the-air TV tuner for the Xbox One gaming console is now available in the U.S. and Canada.

The new OTA device, made in partnership with Hauppauge, gives Microsoft and its Xbox One platform a way to target a small but growing group of cord-cutters (and cord-nevers), while also building on the product’s other video options, including support for over-the-top video from sources such as Netflix, Sling TV and Hulu, integration of authenticated TV Everywhere apps such as HBO Go, TWC TV, and WatchESPN,  and its ability to pass-through traditional pay TV services (by linking the Xbox One to a set-top box via an HDMI cord) and tie it into the console’s OneGuide interface.

To prime the OTA pump, Microsoft said it is selling a bundle with the Hauppauge Digital TV Tuner and  Mohu Leaf 50 antenna at Microsoft retail outlets and online at Microsoftstore.com for $99.99, a $30 discount. Microsoft is also selling the tuner separately for $59.99 at Microsoft stores and via Amazon.

Microsoft said Xbox One users can also stream over-the-air TV to other devices within the home using the Xbox app on Windows 10 devices or the Xbox One SmartGlass app for Windows, Windows Phone, iOS and Android

“Support for over-the-air TV on Xbox One means you can access broadcast networks available in your area, subscription free, and, in true Xbox One fashion, without having to worry about switching inputs between your games and TV,” Microsoft said.

The Xbox One is one of a growing number of products that have emphasized the OTA angle. Others include TiVo (via its Roamio OTA model), Channel Master, maker of the DVR+ system; and Mohu’s recently launched Channels platform.

The number of consumers opting not to subscribe to pay TV services accelerated in the first quarter, driven by overall losses in satellite TV customers, sluggish growth for telco TV and a strong rise in household formation, according to MoffettNathanson principal and senior analyst Craig Moffett.

Pay TV shed about 31,000 customers in the first quarter, compared to a gain of 271,000 subscribers in the same period in 2014. Cable losses actually improved in the period – basic video customers declined about 2.3% vs. a 2.8% decline in 2014 – but a loss of 134,000 net subscribers at Dish Network wasn’t enough to offset a 60,000 quarterly gain at DirecTV. Telco TV providers added 129,000 new customers in the first quarter, about half the 259,000 added in Q1 2014, and not enough to make up the difference in the other sectors.  

Moffett said the rate of decline – about 0.5% over the past 12 months – may not seem dramatic, but it is the “fastest rate of decline on record and it represents by far the largest sequential acceleration we have seen to date.”

In a note to clients, Moffett said the numbers are even more disheartening if you compare them to a strong gain in new households (1.3 million) in the fourth quarter. While the U.S. Census Bureau estimated that new household formation declined by 407,000 in the first quarter, the strong fourth quarter gains and a general firming of household formation for most of 2014 should have led to a gain in pay TV homes.     

Moffett added that the first quarter results also don’t include the impact from new over-the-top services like Sling TV, Sony PlayStation Vue and HBO Now because they either were introduced late in the quarter or after the period ended. And Apple, which has hinted at plans for its own over-the-top service, hasn’t fully entered the picture yet.

“It’s too soon to panic,” Moffett wrote. “But it’s not too soon to be genuinely worried.”

While the overall U.S. pay-TV universe grew subscribers in the fourth quarter of 2014, it did not keep up with the rate of new household formation, meaning that the pace of cord-cutting is actually on the rise, MoffettNathanson analyst Craig Moffett surmised in a report issued Wednesday.

“On the surface, all is calm,” he wrote, noting that the total pay-TV subscriber base rose by 101,000 subs. It gets messy, he added, when those numbers are held against a surge in new household formation in the fourth quarter (1.3 million, according to the U.S. Census Bureau) that typically “provides a tailwind for Pay TV subscribership.”

While conceding that government occupied household data is “notoriously volatile and therefore slightly suspicious,” Moffett said the adjusted numbers indicate that cord-cutting (mixed with cord-nevers) “appears to have markedly increased.”

On a trailing 12-month basis, he added, it appears that 1.4 million homes have cut (or never had) the proverbial cord, which makes it the highest 12-month total yet.  On a cumulative basis, 3.8 million would-be pay TV homes now fit into this group since the first traces of cord-cutting appeared in 2010, Moffett noted.

The fourth quarter of 2014, he noted, “may simply be the calm before the storm.”

As for the U.S. pay TV numbers, the 101,000 total net adds in the fourth quarter represented a year-over-year growth rate of -0.1%. Cable losses (-170,000 subs) in that period slowed to -2.2%, alongside satellite TV growth of 0.1% (+86,000), and a 9.9% growth slowdown by telco TV providers (+185,000 subs).

Moffett also remarked at the emergence of new OTT pay-TV offerings, including Sling TV and its slimmed-down packages and Sony’s coming full-freight PlayStation Vue service.

“While none look like world-beaters on their own, they are likely to have at least some collective impact,” he wrote, also noting that the “real revolution” will likely come from new content providers  that are using new distribution models to reach millennial audiences. 

You can remove the “limited edition” label from TiVo’s recently introduced Roamio OTA DVR, a model that is targeted to cord-cutters and consumers who have never taken a traditional pay-TV package.

Following last fall’s debut of the model, TiVo announced Wednesday that it has rolled out the $49.99 model on a nationwide basis. Users of the broadband-connected Roamio OTA, a device that does not come with a slot for a CableCARD but does work with digital antennas and supports an array of OTT video, are also subject to a $14.99 per month service fee for the underpinning TiVo service.

The TiVo Roamio OTA is equipped with 500 Gigabytes of storage, four tuners, is compatible with the TiVo Stream video-transcoding sidecar, and also supports TiVo’s new OnePass feature.

TiVo didn’t say how many Roamio OTAs have been sold, but company CEO Tom Rogers toldMultichannel News in November that the device “seems to be selling pretty well.” The Roamio OTA is currently a retail-only product, but Rogers also said TiVo is in talks with cable operators about an MSO-optimized version that can be offered to their broadband-only customers.

"TiVo continually innovates to meet the shifting ways consumers want to access their TV content, and we recognized that sections of the market were underserved -- including those choosing OTA for TV and those looking for higher-end DVRs,” TiVo CMO Ira Bahr said, in a statement. That proved true with the demand for the TiVo Roamio OTA after our initial seeding in 400 Best Buy stores this past fall.

"While we are believers that the TiVo service with a cable subscription is the best TV experience out there, we recognize there are those without cable and satellite that have recording needs.”

Channel Master, whose subscription-free DVR+ platform also has cord-cutters in mind, announced this week that it will soon add a "LinearTV" feature that will itegrate live feeds from a variety of OTT content sources, including Bloomberg, Al-Jazzera America, WGN, and WeatherNation, among others. 

The television set continues to be the most-used screen for watching original TV series, but time spent watching TV on mobile and connected devices continues to grab share, particularly among consumers in the tech-savvy Millennials (18-34 year-olds) group, comScore found in a new video viewership study. 

The study – The U.S. Total Video Report, which tabulated results from 1,159 respondents in August – found that Millennials spend about one-third of their original TV series consumption time watching on digital platforms. Boiled down by category, 66% of that time watching TV among Millennials was done on a traditional television, versus 19% of that time on desktops and laptops, 6% on smartphones, and 6% on tablets.

According to the study, about 84% for consumers in the 35-54 year-old age group spent their time watching scripted TV shows on the traditional television, rising to 90% among consumers who are 55 years or older.

More than half of those surveyed said schedule flexibility (56%)  and convenience (52%) were the main reasons for watching TV content on the internet, edging out the ability to skip commercials (38%), the ability to binge watch (35%) and the lower cost for consumers (29%).

Younger adults are also more apt to time-shift. comScore also found that 46% of Millennials’ viewing is typically watched in a time-shifted manner, versus 35% percent among 35-54 year-olds, and 30% among those who are older than 55.

Among other findings, consumers who subscribe to paid digital video services are more likely to binge-view TV shows over a monthly period – 87% vs. 69%. TV via the DVR (43%) is the preferred binge-viewing platform, followed by the TV via VOD (19%); Internet connected TV devcies (12%); live TV – a category that includes reruns or marathons from MVPDs – (11%); tablets (4%), desktops/laptops (3%); and smartphones (2%).

Unsurprisingly, Millennials are also more likely to be cord-nevers or cord-cutters.

Adults 18-34 are 77% more likely than average to be a cord-never household, and 67% are more likely to be a cord-cutter, comScore noted.

Among homes surveyed that don’t take pay-TV services, the survey found that 60% are single-person households, and 52% are in homes without children.

comScore, which uses an approach called Total Video to track unduplicated audience metrics across platforms, conducts the study under the belief that the TV viewership behaviors of Millennials and other “tech-forward segments” will inevitably become more mainstream.