Variety has a good article up on the  subscription cable model and how it’s biggest three players, HBO, Showtime and Starz are coping with customer’s on-demand appetites.   But I had a gripe with this:

That may be especially true in a recessionary environment where many consumers are looking to rein in discretionary spending, although so far there’s no sign of a mass exodus in the latest subscriber figures for pay TV’s Big Three.

Let me get out my club here and bludgeon Variety over the head.

So far there’s no sign of any exodus at all, let alone a mass exodus!  When the numbers can just speak for themselves, let them speak for themselves!  In September 2008, Nielsen estimated coverage for HBO was 30.78 million, Showtime, 18.93 million and Starz in 20.6 million.   In September 2009 the estimates are 32.5 million for HBO, 22.2 million for Showtime and 22.52 million for Starz.   That’s not an exodus, that’s growth!  Significant growth!  Particularly for Showtime.  

Could it be that in a recessionary environment, even as customers rein in discretionary spending,  that the perceived value of  the entertainment dollar for subscription cable services is higher!?

Showtime should make up t-shirts that say ‘I’ve got your exodus right here!” with a graph of its subscriber growth over the last year.  Ok, maybe they shouldn’t, but still.

I had to get that out of my system, but with that aside the story had some interesting points and data, one that I will include in a separate post.

One big hurdle, however, is that on-demand services are not offered by every cable operator because of technical limitations. DirecTV can’t offer true on-demand because its sat-TV platform doesn’t support the same level of two-way communication with the home set-top box as do digital cable services.

“All of the linear networks are challenged by on-demand competition in Internet delivery space,” says Deana Myers, analyst with media research firm SNL Kagan. “The premium networks have been embracing new technologies as a new means of distribution, and looking at different ways in which they can make (themselves) more valuable to the consumer.”

I’ve always thought that the On-Demand issues gave a competitive advantage to cable, and I still do, but On-Demand usage seems to have a very slow pace of growth, even in homes where it is available.  For now, it’s still tiny, smaller than Internet video viewing (which while big in the aggregate is still tiny compared to television viewing).

“Homes with HBO on Demand actually watch twice as much HBO as homes without On Demand,” says HBO co-prexy Eric Kessler. “What that means is that as it provides greater access to programming, it increases overall usage, and that leads to greater satisfaction with the overall subscription.”

The satisfaction factor is a key measure for HBO, because it’s so focused on retaining its existing subscriber base. The oldest of the pay cable pack remains the gold standard, situated in 90% of pay TV homes.

Amen!  And I’m  sure they really mean that and I’m sure, that is, in part why HBO on Demand in High Definition returned.  By taking it away and leaving only the standard definition version, they alienated the paying monthly subscribers who were most likely to use the On-Demand.  I haven’t had Starz for about a year, but at least in the cases of Showtime and HBO, my viewing of those networks is at least twice as much as it would be without On Demand.

There’s a lot more in the article about Starz on Netflix and HBO’s plans for “TV Everywhere” and how Showtime views putting the shows up on iTunes a few months after they’ve aired.  And more.  Definitely worth the read if you’re into the whole on-demand scene.

Posted by:TV By The Numbers

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