On Monday J.P. Morgan released data from a recently completed survey of cable subscribers and Netflix (NASDAQ:NFLX) customers implying that cord cutting is accelerating. Of course, there is no real data to show consumers are actually going through with the idea of cord cutting in any volume, but that has not stopped some folks from using the data to imply a trend is taking place, or is about to, when in fact it isn't.
Not everyone is falling for the hype and Peter Kafka does his usual fine work of questioning whether or not the data makes sense. But others like NewTeeVee.com want to use the survey to imply that Netflix is already turning consumers into cord cutters and that this is a trend. The fact is, the J.P. Morgan Consumer survey is really pretty useless, as are most of the surveys on this subject. The only numbers that matter when it comes to cord cutting are the actual number of consumers who cut the cord and go through with it, not the number that would like to, are "tempted" or are "considering" it. Because for the vast majority of them, they can't cut the cord easily and get the content they want.
Of course, when you ask people if they would like to cut the cord or want to do away with spending money on something, the percentage of people that will agree with the idea is going to be high. Who doesn't like the idea of saving money? Is anyone surprised by data that shows consumers like this idea? How is that considered data that's meaningful to the industry? If so many consumers are interested in the idea, then why aren't they doing it? Because for most, there simply is not a viable alternative to cable TV in the market today. Of course there could be in the future, but not today and not anytime soon.
In addition, the report data is flawed because the results combine the number of people who would considering dropping pay TV or have already done so. You can't put those numbers together. If the number of consumers who have cut the cord is so high, where are the numbers to prove it? Outside of the gaming consoles, most of the devices that would allow someone to get over-the-top content haven't even sold 1M units yet. If consumers have tried an alternative to cable and liked it enough to consider cutting the cord as the report states, then why haven't they actually followed through on it? Because as we all know, considering something and actually doing it are two different things, especially when it's not easy.
We should care about the real numbers of how many people actually adopt something, actually use a service, actually buy a device and actually consume content in a different way and NOT the number of people who are simply interested in the idea. Just look back over the last ten years at how many services and products have come to the market because flawed data said consumers were interested in the offering, yet those products then failed because customers didn't actually go through with buying them or they didn't work as well as imagined.
Remember for how many years everyone in this industry talked about the convergence of the TV and the Internet? All the data in the market we were given said consumers wanted it, but how many products and services actually succeeded in the market that followed through on the offering? I would argue none. We're really only just starting to see the beginning of convergence today, ten years after the industry first started making an issue of it.
Does anyone care about real numbers anymore? All day long we keep getting numbers on all aspects of this industry on what will happen, should happen, could happen or is suppose to happen. How about we spend our time and efforts on studying the numbers of what's actually happening? There is nothing wrong with putting out projections, but base it on real data, not speculation from surveying a bunch of consumers who haven't even done the thing you are surveying them about.
One of the definitions of a trend is, "the change in a series of data over a period of years that remains after the data have been adjusted to remove seasonal and cyclical fluctuations". A second definition is, "a pattern that is evident from past events. Sufficient data is required to see if there is a relationship of one or more variables over time". Based on these definitions, we don't have enough data in the market to show cord cutting is a trend. In fact, many were quick to say it was starting to become a trend simply based on only one quarter of data from the cable companies.
Why am I so adamant about this? Because if we portray and hype any aspect of this industry when it's not actually taking place, wrong expectations get set. And when that happens, VCs invest money into companies that won't survive, companies change the focus of their business based on misguided data and the value of the products and services in the industry get inflated beyond reality. We've had this problem as an industry in the past. And when you set wrong expectations with consumers, the end result is even worse.
Disclosure: No positions