Michelle Clancy ©RapidTVNews | 15-09-2011
TV and mobile operators "face an affordability crisis," said Craig Moffett, senior analyst at Bernstein Research, in a client note. He went on to raise the spectre of video cord-cutting in an era of steep unemployment and declining real income.
Services like Comcast's cable TV packages and AT&T Mobility data plans only keep getting more expensive, even as Americans are looking for way to cut household spending. Average rates for cable TV have risen 29% since 2006, even as "average household income has declined in real terms," he noted, so "pay TV risks being priced out of the reach."
Sure, "higher-end" American consumers "are racing to adopt smartphones" and the accompanying data plans, he noted. But "the trade-down for the bottom end is faster than the trade-up for the top." Lower-end customers" (and a full 60% of American households bring home less thant he $62,000 average income) are looking to OTT video and prepaid phones as they struggle to put food on the table. It's a situation he said will only get worse as budget cuts mean lessening state assistance and the cost of basic goods--food, clothing--continues to rise out of whack with the general economy. And that means only one thing: cord-cutting.
Moffett is not alone in his assessment. Research firm Parks Associates indicates consumers are increasingly willing to discontinue or downsize their pay-TV services while compensating by accessing video from over-the-top (OTT) sources. As a result, broadband, television, communications and wireless service providers must take on new roles and execute innovative business strategies to stay competitive in this new market.
"By 2015, consumers in North America and Western Europe will be spending nearly $16 billion for online video," said Kurt Scherf, vice president and principal analyst at Parks Associates. "Growth of connected consumer electronics, advances in mobile and portable devices, and challenges to access service delivery models are all impacting delivery of content and services."