Is OTT Video a Substitute for TV? Policy Insights from Cord-Cutting
Jacob Malone, Aviv Nevo, Zachary Nolan, Jonathan W. Williams
Abstract
Abstract The video entertainment industry is experiencing increases in over-the-top (OTT) video usage and cord-cutting behavior. Using unique panel data from 2012–2016, we document the behavior of the 2.4% of households who “cut the cord” annually. After dropping TV, these households increase internet usage by 22%, reduce payments to multiple-system operators (MSOs) by 50%, and 16% acquire new OTT video subscriptions. These results indicate meaningful substitution between OTT video and TV and suggest that competition authorities should consider broadening market definitions. MSOs appear to have little incentive to degrade OTT video, despite OTT video's contribution to declining TV revenues.