Analyst: Cord-cutting fears overblown

NEW YORK -- Media and cable executives and investors have intensely discussed the risk of cord cutting, or consumers giving up their cable or satellite TV subscriptions to watch TV content online instead, as of late, but one analyst on Tuesday suggested fears are overblown.

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"The concept of being a so-called 'cord-cutter' sounds cool (leveraging technology) and/or rebellious (fighting the entrenched multichannel video system)," BTIG analyst Richard Greenfield wrote Tuesday. "But cool and rebellious do not necessarily translate into action. While we are concerned about the long-term potential of "over-the-top" video, we simply do not view it as a major threat to the cable and satellite industries over the next 3-5 years."

In the second quarter, for the first time ever, total multi-channel TV video subscriber figures declined.

"Rather than blame the obvious (a U.S. economy with housing going nowhere fast, high unemployment and consumer discretionary income falling), investors are concerned that cord cutting is becoming a "real" threat to the multi-channel industry (distributors first, followed closely by cable network programmers who get paid for every subscriber to the multi-channel video providers)," Greenfield said.

After much discussion of cord cutting at an investor conference last week Greenfield shared insights from a survey of 1,300 consumers.

Of the 1,200-plus that subscribed to multi-channel TV service providers, 37% have considered dropping their cable, satellite or telecom video service, according to the analyst. "Yet, when the 434 potential "cord-cutters" were asked if they would actually drop if it meant losing live sports events, missing out on live reality TV results shows and missing some of their favorite programming entirely (such as "True Blood" or "Weeds"), only 96 people (less than 8%) would still consider dropping [their] multi-channel TV provider," Greenfield wrote.

But adjusting for the young-skewing, Web savvy survey panel, he concluded that "actual cord cutting risk is well below 5%." He added: "Key content rights holders simply are not going to enable over-the-top video to disintermediate the multi-channel video industry that funds/supports the cable network/TV content creation industry that exists today."

Also, given that cord-cutting requires a high-quality broadband connection, cord-cutters are "still highly likely to subscribe to cable operators for broadband service," the analyst concluded.

What does a cord cutter look like? They are younger, watch less TV and are less likely to get HBO or Showtime, according to Greenfield.