The rate by which traditional U.S. pay-TV subscribers are cutting the cord in favor of more price friendly over-the-air and over-the-top programming distribution alternatives is ratcheting up in a big way.
A report released Tuesday by research firm eMarketer forecasts the cord-cutting trend will climb a whopping 19.2% this year, totaling 40.2 million households that have ditched a cable, satellite or telco pay-TV service, leaving some 86.5 million still tied to the services.
“This year, the number of pay TV households in the U.S. will decline by 4.2% to 86.5 million. With that negative growth rate holding relatively steady, the number of households subscribing to traditional pay TV services will drop below 80 million by 2021. At that time, more than one-fifth of households will be cord-cutters,” the report states.
By 2023, the number of households without pay TV is expected by the firm to reach 56.1 million, while traditional pay-TV customers drop to 72.7 million.
The reason for the acceleration seems to hinge on some of the multichannel video service providers priorizing profits over subscriber retention, as they raise rates across the board and watch relatively new customers that signed on through a limited time promotional offer jump ship when the promo period expires and monthly fees balloon upward.
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The research firm said this is particularly true of telco companies which are expected to see TV subscribers fall off by 2.4%. But satellite providers are seeing the biggest losses as their subscribers decline by a predicted 7.1% this year. In comparison, cable operators should see a 2.4% decline.
“As programming costs continue to rise, cable, satellite and telco operators are finding it difficult to turn a profit on some TV subscriptions,” noted eMarketer analyst Eric Haggstrom in the study announcement. “Their answer has been to raise prices across the board, and it seems that they are willing to lose customers rather than retain them with unprofitable deals. This has been a boon for TV providers, who also offer broadband internet, as it removes consumers from bundled deals. It forces consumers to pay a higher price for internet, which dramatically improves profit margins.”
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As traditional pay-TV customers drop their packages, many are moving to over-the-top services including video-on-demand services like Netflix, Amazon and Hulu. These will be even more numerous and attactive as content producers, like Disney, WarnerMedia and Apple, begin to offer their own direct-to-consumer apps in coming months.
Another omen comes in the rate by which cord-loyalists and others are decreasing their viewing time. The study reveals that this year TV viewing time will drop 3% to 3 hours and 40 minutes on average, and that’s across all age groups. However, the segment that is watching significantly less viewing time is among viewers 17 and under, who grew up without restrictions of linear TV viewing schedules, the study found.
The likely result of all of this? EMarketer expects broadcasters and service providers are going to have to ask higher prices for advertising, which is likely to hurt sales forcing networks like CBS and NBCUniversal to beef up their own direct-to-consumer apps and services.
By Greg Tarr
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