Is OTT Video a Substitute for TV? Policy Insights from Cord-Cutting

Jacob B. Malone, Aviv Nevo, Zachary Nolan and Jonathan W. Williams
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Jacob B. Malone: CableLabs
Aviv Nevo: University of Pennsylvania
Zachary Nolan: University of Delaware
Jonathan W. Williams: University of North Carolina at Chapel Hill

The Review of Economics and Statistics, 2023, vol. 105, issue 6, 1615-1623

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.

Date: 2023
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