While
the pay TV industry has appeared to have side-stepped the threat from
"cord cutters" there's a new threat looming on the horizon:
"cord nevers."
Speaking
at a conference on
media at the Paley Center, Time Warner Cable CEO Jeff Bewkes said that
while the pay TV industry was not threatened by the likes of Netflix or Amazon
poaching away existing subscribers, it did face a challenge from young
customers who grew up in a world of Netflix and YouTube and may not seek out a
traditional pay TV package when (if) they move out into the world. These are
the "cord nevers."
But
Bewkes, making the case for traditional pay TV, made an interesting statement,
as relayed by reporter Jeff John Roberts:
For them [cord nevers], he said it’s not a
question of money — “they can afford three Starbucks a day” — but rather
different habits and expectations. Bewkes pointed out that the “cord nevers” are not receiving the best content ...[emphasis added]
The
implication is that once confronted with "the best content" these
cord nevers will see the light and pay up.
Maybe,
or maybe not.
In
fact, there's good reason to believe that Bewkes may be wrong about the quality
vs. convenience argument. Just look what happened in the music/audio equipment
business. When the MP3 file was born, purists turned their nose up at compressed
audio. I recall many an argument from consumer electronics firms pooh-poohing
the lousy audio quality and insisting that people would quickly tire of
listening to music through crumby PC speakers or earbuds. Out of this
conviction the DVD Audio and Super Audio CD formats were born.
We all
know how that story ended.
Or take
compact digital cameras. While smartphone photography has vastly improved
relative to where it was three or four years ago, it's still woefully deficient
next to an inexpensive point-and-shoot camera. Yet the point-and-shoot category
is suffering in large part thanks to smartphones.
In both
cases, convenience and cost trumped quality.
This
matters because, to date, while traditional pay TV firms have a relatively
strong hold on "quality" (i.e. content that the vast majority of
video consumers want) they are failing on both convenience and cost. Take
"TV Everywhere." As Peter Kafka observed,
the promise of pay TV access across a range of devices isn't being realized by
the traditional pay TV providers. Netflix or Amazon Instant Video subscribers,
however, have no such problem and deliver their services at a fraction of the
cost.
Chances
are most "cord nevers" will tie themselves up with a traditional pay
TV provider - particularly if they're sports fan and (more importantly) once
the economy improves and they get jobs. Still, until pay TV providers shore up
their convenience and cost propositions, they'll remain vulnerable to
"cord nevers."
