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Analyst: Live Sports Thwarting ‘Cord Cutting’

4 Oct, 2010 By: Erik Gruenwedel

This week’s start of the Major League Baseball postseason playoffs, the National Football League and college football are among the seasonal live sports events that are keeping many consumers tethered to their monthly cable/satellite TV service, an analyst said.

Sports, reality TV and original programming on HBO and Showtime Networks continue to undermine perceptions on Wall Street and proffered by pundits that Internet-based subscription services such as Netflix, Hulu Plus and related repurposed TV program aggregators (and TV DVD) are driving cable subs to cut their service.

The discernment fueled in part after multichannel subscriber growth, including premium channels (cable and satellite), fell slightly in the second quarter for the first time in years. A recent ABI Research consumer survey of 1,005 consumers found that about 32% of those surveyed were interested in watching Internet video on the TV – nearly double the number who expressed the same interest in a similar 2008 survey. Then again, only 13% said they would actually cancel their pay-TV services and receiving video content just from the Internet, via over-the-air/terrestrial transmission, and/or rentals.

Richard Greenfield, analyst with BTIG Research in New York, said concerns that so-called “over-the-top ” services are replacing premium channels with Web-based content are overblown. With 60% of Netflix subs streaming 15 minutes of content per month, and Hulu users streaming just 5.5 minutes per day, Greenfield said Web-based services lag far behind in light of the fact the average U.S. adult watches more than five hours of TV per day.

“Investors are incorrectly tying the growth of Netflix/Hulu, to the weakness in multichannel video subs,” Greenfield wrote in a post.

ABI Research found that the alternatives to pay-TV, including Netflix and Hulu, are decentralized and complicated to negotiate, according to respondents.

“Trying to fit all these individual pieces together to replicate what you get from pay-TV, is often either too much work, or certain content is still missing," said analyst Michael Inouye. "It’s partly the multiple content aggregators involved, but there may also be technological issues – insufficient bandwidth in the consumer’s online connection to cope with the demands of HD, for example.”

Indeed, Jim Miller is keeping his satellite TV service since he can record multiple episodes of “Two and a Half Men,” the popular CBS comedy that is available on Netflix only in early seasons only on DVD. Also a fan of blue-collar comedian Ron White, Miller watches White's comedy specials on Netflix streaming or on DVD (from Image Entertainment).

But the Foothill Ranch, Calif., resident isn’t about drop satellite service for the Internet. In fact, he just switched to DirecTV from Dish Network so he could get higher-priced “NFL Sunday Ticket in HD” to watch his hometown Philadelphia Eagles.

“You can live anywhere and see your team,” Miller said, adding he was considering paying a supplemental charge in order to watch up to eight football games simultaneously.

The average U.S. household’s preference for live sports bodes well for multichannel distributors due to the genre’s limited availability online.

Greenfield said he viewed the 8% of BTIG Research’s 1,200 survey respondents cited as being interested in cutting the (multichannel video) cord as too high after adjusting for age, Internet use, Netflix use, and hours of TV watched per day.

“We believe less than 5% of Americans would actually consider substituting broadband video (and DVDs) for their existing multichannel video subscription,” Greenfield wrote.

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