Sticking It To The Man, Millions Of Cord Cutters Defected From Pay TV And Satellite In 2018

Streaming TV
After decades of ruling the roost, pay TV services have been hemorrhaging customers in recent years, thanks to the increasing availability of broadband connectivity and the advent of streaming services. Millions of pay TV subscribers have now cut the cord. Cable and satellite TV providers should be worried, though there is also evidence to suggest that the worst losses are behind them.

For anyone who is unfamiliar with the terminology, cord cutting simply refers to ditching traditional pay TV services via cable or satellite, and adopting a streaming solution. Services like Amazon Prime Video, Hulu, Netflix, Sling, and YouTube TV all offer streaming options that in some cases can be more affordable than paying for a traditional TV package.

This is where things get interesting, and potentially puzzling. Adam Levy at The Motley Fool rounded up a couple of reports on cord cutting data, one of which says pay TV subscribers peaked at 105 million households in 2010. Since then, around 14 million homes have cut the cord. However, that same report suggests there may be light at the end of the tunnel for cable and satellite TV providers.

"Despite the overall falls, cord-cutting is slowing. The US will lose 3 million pay TV subscribers in 2019—down from a decline of 3.8 million in 2018. Annual losses will diminish after 2019," says Simon Murray, Principal Analyst at Digital TV Research.

The same report also says that the number of TV households that do not have a pay TV subscription will quadruple from 11.34 million in 2010 to 48.56 million in 2024, so it's kind of all over the place.

A separate report by Leichtman Research Group (LRG) found that the largest pay TV providers in the US (which have a 95 percent share of the market) lost nearly 2.9 million video subscribers in 2018, compared to a loss of more than 1.5 million in 2017.

DirecTV was hit particularly hard. The satellite provider saw more than 1.2 million subscribers cancel service in 2018, compared to 554,000 in 2017. Not all of those customers necessarily defected to a streaming solution, but the overall losses are telling.

At the same time, the top six cable companies lost around 910,000 video subscribers in 2018, compared to 680,000 in 2017, LRG says.

"Since the industry’s peak in 1Q 2012, pay TV subscribers for the top providers have declined by about 6,000,000. This reflects a decline of about 10,000,000 subscribers for traditional services, offset by the addition of about 4,000,000 subscribers for the publicly reporting vMVPD services," says Bruce Liechtman, President and Principal Analyst for LRG.

It seems evident that pay TV customers are being enticed by lower priced alternatives in the streaming space. That said, streaming services risk shooting themselves in the foot, if they're not careful. Sling, for example, recently raised its baseline price from $20 to $25 per month. It also offers a bunch of add-ons that can quickly raise the price, such as Cloud DVR for an additional $5 per month and oodles of extra channels.

Likewise, Hulu's Live TV option also saw a price increase at the beginning of the year, going from $39.99 to $44.99 per month, and Netflix's prices have gone up as well.