I'm constantly on the lookout for data points that provide insights into how viewer behavior may be changing, particularly with respect to possible shifts from traditional pay-TV offerings to new over-the-top (OTT) alternatives.
That's why a client note from the media analysts at Citigroup this week, which highlighted the ratings drop-off that cable TV networks as a group are experiencing, caught my eye. The Citigroup note follows a recent WSJ report explaining that 11 of the top 15 cable networks have lost audience this year, including a whopping 25% decline at Nickelodeon among its kids 2-11. Citigroup said that for each of the last 6 months, cable's total day ratings decline has actually accelerated, from 2.3% last October to 7.8% in March.
Citigroup's main concern about this ratings drop-off is that cable networks' ad revenue growth is slowing as well, in turn pressuring their media company owners' valuations. While that is surely a worry for investors, an even broader issue to consider is whether the drop-off in cable's ratings is the tip of the OTT iceberg, signaling that the explosion of online-delivered alternatives is beginning to impact viewership patterns. While it's too early to conclude this, all of the elements that would drive OTT's rise - at cable's expense - appear to be falling into place.