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Cord cutting of pay TV services accelerates
October 21, 2011

Consumers subscribing to television service via cable, satellite or telco services are downgrading their services at an accelerating pace, according to a new industry study.

Parks Associates of Dallas said in a recent report that 13 percent of viewers who have broadband connections have made cutbacks within the last 12 month, and another 9 percent is about to cut the cord. Park's study said this includes about 3.9 million people who regularly watch Internet video.

"Cord cutters," who typically spend $20 or less on monthly video services, are heavy TV users. They watch, on average, 4.2 hours of Internet video on their TV each week. Parks found the move away from pay TV is more closely linked to the growth of broadband adoption than watching more Internet video.

This does not bode well for the "TV Everywhere" initiative being pushed by cable services. It allows only subscribers, who enter passwords, to view content online.

HBO, for example, came to Apple's iPad and iPhone plus several Android devices in the early summer as part of "TV Everywhere." It enables subscribers to the premium cable network to access new release movies, as well as every episode from every season of every HBO original series on the Apple and Android devices.

The iPad is fast becoming a new battleground for online and traditional video programmers and distributors. While online video services like Netflix and Hulu Plus have long had iPad apps, cable companies and their network partners are creating their own services for the device as long as viewers are paying subscribers.

Some programmers, like Viacom, have complained that those distributors don't have the rights necessary to stream to new devices like the iPad, and that such apps limit the possibilities for building their own apps or licensing their content to new online and mobile distributors.

But there may be much larger problems than rights. The Park's report said "TV Everywhere" would be an ineffective retention tool. Its data suggests that 11 percent of all pay-TV households, or 6.5 million homes, would pay an extra $15 a month. Many consumers view "TV Everywhere" as a "premium package." The study suggested that "TV Everywhere" providers will see gains only if operators offer no-frill packages.

Parks found that 22 percent of all broadband households now use the Netflix Watch Instantly service. It was also suggested that STB distributors find a way to include YouTube, the digital video service, which is already being included in many Internet-connected TVs on the market. The study said that nearly half of all flat-panel TVs sold in 2011 are Internet connectable.

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