Why is cord cutting such a big phenomenon in North America but no so much elsewhere?

For everyone outside North America:

Why is cord cutting such a big thing in North America?

Americans have a love/hate relationship with cable TV. They love watching TV (the average number is 5 hours per day, more than anywhere else in the world, but cable TV operators rank among the companies with lowest customer satisfaction. Partly this is because of poor customer service but the ever increasing prices of subscriptions have contributed a lot.
U.S. citizens on average pay $123 per month for a cable TV package of 189 channels, of which they only watch about 17 regularly.
As in most parts of the world, consumers don’t have much choice when it comes to TV – in each given area there’s typically just one cable operator. That hasn’t spurred much competition and the lack of choice doesn’t help customer satisfaction.

Why is the cable bill so high? One reason is bundling: You don’t get to pick channels à la carte but can only choose from packages with lots of other channels thrown in. More important probably are the retransmission fees – the money broadcasters charge to cable operators for letting them transmit their channels. The broadcast networks are extremely powerful. ESPN (sports network, owned by Disney) for instance contractually requires from cable operator that they’re included in the basic package. They’ll sue anyone any operator that attempts to move ESPN to a premium package, like they did for instance with Verizon when this operator introduced a ‘skinny bundle’. This means that any Americans who don’t care about sports but have cable TV pay to keep sports affordable for the fans. This profitable scheme has enabled ESPN to spend more on sports rights and the sporters’ salaries to increase accordingly, in an upward spiral.

Until now. In the US, ‘TV Everywhere’ offerings typically meant the content provider would let you stream their content but you still needed a cable subscription for authentication – a restriction that’s unknown outside North America. Increasingly, content is available through OTT SVOD services like Hulu, Netflix and Amazon that don’t require cable – just a broadband subscription (and the SVOD service).

These services do not cover everything. Local sports, for instance, you will not be able to get – for now, at least. But for people who care little about sports, cord cutting has become a very viable and less expensive alternative.

For Americans:

Why isn’t cord cutting a big phenomenon overseas?

Is the rest of the world just running behind America a couple of years or is something else the matter?

It’s a known fact that millennials (generation Y) have different viewing behavior than the generations before them (generation X, baby boomers). The younger people are, the less inclined they are to watch linear TV. This you see everywhere around the world where linear TV and on-demand OTT services are available, i.e. everywhere in the developed world.

Market data shows however that these services are enjoyed in addition to a regular pay-TV subscription.

Note, by the way, that there are big differences between countries as to how they get broadcast TV provided. Some countries such as the Netherlands and Belgium like the U.S. rely largely on cable. In France and China, IPTV is very important. Other countries such as the UK, Germany and France use a mixture of terrestrial, satellite and cable distribution.

So don’t people in Europe and Asia dislike their cable companies like Americans do? Apparently not. There’s no data to suggest high dissatisfaction. That’s probably because rates are fair: European consumers pay between $10 and $50 per month for a cable TV package, depending on the country they live in. Because they often take their TV services as part of a triple-play or quad-play bundle together with broadband, fixed line telephony and increasingly even a mobile subscription, they wouldn’t be saving much by ditching the TV package.

Will cord cutting rise in Europe? Maybe, over time. Recent market research suggests youngsters see less and less of a point in keeping a pay-TV subscription but for now pay-TV operators are in good health and growing. At the current rate it’s not likely to become a big thing any time soon.

Yoeri Geutskens writes about video technology.

A revised version of this piece has appeared here.

 

 
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