Peter Kafka over at All Things D has been facilitating an interesting exchange between Time Warner's Jeff Bewkes and Netflix’s Reed Hasting. Aside from being rich with pithy quips, the somewhat friendly back and forth has a subtle yet palpable undercurrent of tension. It's a calculated dance between Bewkes and Hastings, whose industries at least seem like natural competitors.
At issue is "cutting the cord," the act of getting rid of cable, or in Bewkes case, premium cable services, and exchanging them for online/ digital alternatives like Netflix or smart TV options like Roku.
Roku VP of Business Development Jim Funk recently told Beet.TV that according to internal tracking, about 15-20% of Roku owners cut the cord completely, while another 15-20% scale back their cable services. He stresses that users tend to treat Roku as a supplement, while also pointing out that we are likely to see the cord-cutting trend continue.
This is one of those instances where there is a bit of dissonance between the techgeek/early adopter crowd and the general population. Media pundit Daisy Whitney highlights the fact that young urbanites are the most likely to get rid of their televisions and cut their cable.
NBA Digital's Bryan Perez supports this statement by pointing out that its statistics show a strong correlation between usage habits and age: "For those NBA Digital customers who only subscribe to content over broadband, there’s a split between consumers who paid for linear NBA content and then switched to Internet, and those who never paid for linear NBA programming before signing up for a digital package."
So while the tatted up hipster down at the local Starbucks may never again watch TV on an actual TV or on cable, it's unlikely that his Midwestern parents are going to cut the cord anytime soon. That's not to say that this type of usage behavior won't eventually reach the hoi polloi - it just means that the industry has more time to adjust than it may think.
There are plenty of opportunities to go around. Whitney reports that the CW Network found that 97% of its online ads were watched to completion, and that increasing its online ad loads saw a 59% increase in usage and exponential growth in view time. There is money to be made by accepting digital users.
Keeping the model closed the way HBO does just creates a black market -- wait, market implies payment. What I'm saying is if a company doesn't offer content that I as a consumer want or share it on a channel that I use, I will just steal it.
OK, maybe not me but other people will steal it. I don't have HBO but I watch Treme and Boardwalk Empire. Sure, I could go to iTunes and buy the episodes, but I'm not going to, I don't necessarily need to 'keep' the content. I'd rather stream it, I don't mind watching commercials, I wouldn't mind paying for a digital package but I don't want to HAVE to add HBO to my cable package and couldn't if I wanted to because my provider doesn't offer it. If I could get an HBO app, or buy-in the way I can with Hulu+, I would readily do it, and get my content straight from HBO.
In his interview with Kafka, Hastings offers another benefit to the video on demand distribution. He refers to Netflix as having a "rerun model" - arguing that: "What we’d prefer to be is the buyer of prior season, or expired season, like an “In Treatment.” Or have all the episodes of “Dexter.” We think if we focus on prior season, we can help build audience for current season."
As a consumer, this has very much been my experience. I have been exposed to shows I would never watch on TV but have watched through Netflix that I now love [Like the British cop drama 'Luther' -- check it out] that I will watch on their parent channels. My point here is that if you have content I want, I will get it, if that means watching ads, paying for it to stream through my Wii or straight up stealing it, it doesn't matter. So to HBO I ask, I'll give you my money, why won't you take it?