A single Google search of “Cord Cutting Trends” results in an array of information with headlines reading: “Cord Cutting Trend is Accelerating,” “Cord cutting has reached its peak,” “Cord cutting is losing momentum,” “Traditional TV struggles to keep up with cord cutting trends.” Despite all of the conflicting headlines, one thing is for certain: cord cutting has been growing, but TV service providers are responding to the trend in ways that set themselves up for future growth and success while maintaining customers who are “cord-loyalists.”
According to Nielsen, 14% of US homes have opted out of their cable or satellite TV subscription, or “cut the cord”. Cord cutting is a catch-all term for cancelling a TV subscription or opting for an Internet-only subscription rather than TV and Internet bundles. Customers have noted that there are three key benefits to cutting the TV cord:
- Lower costs with no contracts.
- The “a la carte” channel selection allows customers to customize their content versus paying for a bundle of channels they don’t want or watch.
- Lower equipment costs thanks to smart TVs and Internet ready devices such as the Amazon Fire Stick or Roku streaming players.
Research firm eMarketer suggests that cord cutting trends should continue for at least the next five years. Currently, 90 million households have a satellite or cable TV subscription, while 36 million have opted out of traditional TV services. Additional findings from eMarketer suggest that by the end of 2023, pay TV households will drop to 73 million and 56 million households will opt out of traditional TV.
Cord Cutting Effects on Carriers
However, traditional TV is just one avenue of revenue that service provider companies offer. According to research firm MoffettNathanson, AT&T, Charter and Comcast’s second quarter results add up to a bad quarter for traditional video service. AT&T reported losing 946,000 video subscribers; Comcast lost 224,000 video subscribers, and Charter lost 150,000 video subscribers. These losses can be attributed to the number of subscribers who dropped the service after coming off of the promotional pricing. With such dramatic subscriber losses, it’s worth noting that company shares are still thriving. When customers opt to cut the cord, they transition to high speed Internet. High speed Internet boasts a higher profit margin than TV service, and as a result, top pay TV and cable providers have remained largely unaffected by cord cutting trends.
In addition to offering Internet-only options to customers, some providers have also partnered with popular streaming services and are offering promotional incentives to prospective customers. Comcast recently announced that they would be providing their Internet-only customers with their own OTT device, and even removed the monthly fee. Other carriers will inevitably adopt this opportunity as well to mitigate the losses experienced in their traditional TV services.
Is Cord Cutting Cheaper?
Cutting the cord seems like an easy way to save some money each month, but that may not be the case. Consumer reports show that stacking a variety of Internet based video streaming platforms results in the equivalent of a monthly cable bill. While stacking streaming services gives customers their own custom variety of content, streaming services are also experiencing consistent price hikes. YouTube TV’s monthly subscriber price has increased from $35 per month in 2017 to $50 per month in 2019. Hulu + Live TV has also experienced similar hikes, rising from $40 in 2017 to $45 in 2019. While streaming TV services don’t have additional fees, stacking streaming services and the rising monthly costs can easily go beyond what customers were paying with a traditional TV subscription.
Cord Cutting Threat to Internet
With more and more video streaming options emerging, or splintering into individual services, cord cutting trends might dwindle down as customers attempt to balance their preferred content, the number of streaming platforms they subscribe to, and the growing monthly costs of stacking streaming platforms. The heavily saturated video streaming market requires providers to think outside of the box, knowing their subscribers may bounce between a variety of services. Depending on how video streaming services respond to the volume of options available to customers, they may end up essentially re-inventing TV services.
Current cord cutting trends focus on TV, not Internet. However, as new Internet technologies emerge, the future of cord cutting may be gearing up to turn the Internet service industry on its head. The growing number of home Internet options might be enough for customers to drop their DSL or cable subscriptions for something more flexible and customized to their needs. The future of cord cutting is wholly dependent on the moves Internet providers make. With 5G technology on the forefront of wireless providers’ minds, customers will have a wider variety of Internet provider options.
Key Cord Cutting Statistics:
- A study from PwC shows that 90% of American cord cutters are between the ages of 25 to 34, the second biggest group are between the ages of 18 and 25.
- Despite customers cutting the cord, as of August 2019, Comcast shares are up 24%, Charter Communications shares are up 33% and Altice USA shares are up 59%.
- Nielsen research shows that there are 6.6 million homes that rely exclusively on free content via an antenna or online if they have Internet access, representing 6% of all US homes. These households do not have Netflix or Amazon Prime Video subscriptions.
- 4 million homes subscribe to one or more streaming service in addition to free Over the Air (OTA) content from antennas.
- By 2022, it’s estimated that there will be 55.1 million cord cutters.
Stay in-the-know on the impacts of Cord Cutting and other developing trends by following Actiontec’s featured Industry Articles or the Actiontec blog.
