Cord-cutting is emerging and indicates a much broader set of upheavals in the television industry. First, the economic crisis fuels tensions surrounding the primary income of the established players (advertising and subscription). Then, there is an underlying trend of consumption-by-the-unit and a shift towards non-linear usage patterns that threaten to shatter lucrative packaging schemes. Finally, the entry of Internet industry players who master these new usage patterns and are a step ahead when it comes to interfaces will be a key element in the future.
The traditional television players – channels and distributors – are facing a true pincer effect. Channels are seeking alternative growth models that include enhanced B2B with distributors and entry into the online market in search for a springboard for advertising growth. For their part, distributors are seeing Internet players encroach onto their networks, while rights holders and channels continually weigh the benefits of partnering with them. The instability is permanent and the current inability to devise sustainable collaboration schemes only increases the risk. The key issue is disintermediation. In the US, where the threat of cord-cutting is greatest, industry players’ strategies are mainly defensive:
• Rights holders and TV channels use to hesitate between traditional distributors and the new ones (i.e. Internet-based);
• Distributors are attempting to retain their subscribers with multi-screen offers by focusing on the Internet access growth engine (itself a vehicle for disintermediation) and – in a new trend – by working together. Europe may think that it is temporarily preserved from the US tension. Indeed, pay TV does still have its growth drivers. Nonetheless, the European audiovisual industry has certain weaknesses:
• Europe lags behind in many ways in terms of technology (network deployment) and content offerings, especially because of the continent’s cultural and linguistic fragmentation.
• It is partially dependent on US audiovisual products, while the entrants in the internet market that master technology and interfaces come from the US.
According to Jacques Bajon, project leader of the study, “OTT video services will continue to expand and influence the TV access market because they meet user demand: flexibility and richness of content offerings, user-friendliness (these new entrants usually offer much more accomplished consumption interfaces), prices (a monthly subscription to Netflix equals the purchase price of a DVD), “anywhere, any terminal” usage patterns – unlike operators’ segmented offering. More importantly, if Google’s gamble pays off, the changes could be much more fundamental and rapid”.