Report: DVDs, not pay-TV most likely casualty of OTT, VOD delivery

A new study says renting and buying DVDs are the most likely casualties from increased use of over-the-top and on-demand video services, and that cord-cutting as a trend has been exaggerated.

The study, "2010: The New Age of Video Entertainment," from Frank Magid Associates, asserts that only 1 percent of consumers in the survey have actually cut the cord to their pay-TV operators, far fewer than previous studies that have shown.

In fact, FMA argues that users are simply switching operators rather than looking for content over the top. The study found that consumers who use the greatest number of alternative platforms tend to also spend the most on subscription services, indicating that OTT delivery may be used to augment traditional delivery.

"The average American's capacity to consume video content is impressive," said Maryann Baldwin, VP of Magid Media Futures. "As new video viewing platforms such as instant streaming and mobile apps proliferate, consumers are simply adding them to their portfolio of video viewing options. Our research indicates that this is definitely not a zero-sum game--at least at this point, it appears that traditional subscription services and alternative viewing platforms can coexist with services like 'TV Everywhere' locking in revenues for traditional providers."

The report also contradicts several other studies in the volume of consumers considering cutting the cord, saying only 3 percent of respondents would look at the option.

Magid said its study consisted of 1,208 respondents 12 years of age and over.

In September, Verizon CEO Ivan Seidenberg said he believed "over the top is going to be a pretty big issue for cable," adding, "We take the over the top issue with video very seriously. I think cable has some life left in its model... but that it is going to get disintermediated over the next several years. I've seen the movie. If you remain static too long, the technology is going to nibble at you on the edges, and you have to be prepared for it."

Credit Suisse, meanwhile, estimates that 1-in-3 young Netflix users have cut the cord to pay-TV as well, and said in a September report, "Netflix's low cost, subscription streaming service (with improving content) is our biggest worry and could become 'good enough' for consumers with moderate income and TV usage to use as a substitute for pay TV."

In April, a Yankee Group analyst said up to 12.5 percent of pay-TV subscribers could cut the cord in 2010.

For more:
- see this release

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