Cord cutting is a topic which we discuss on a fairly regular basis, particularly over the last several quarters as the subscriber losses for cable companies have seemingly accelerated (see: Cord-Cutting Accelerates, Sends Shock Wave Across Traditional TV).  Not surprisingly, one of the biggest losers of the cord cutting phenomenon has been ESPN, a media giant that ironically was one of the largest, if not the largest, beneficiaries of the cable TV bundle since it made its debut in 1979 (see: ESPN Lost 15,000 Subscribers A Day In October).

Of course, as TDG Research notes this morning, the wave of Americans electing to forego the massively overpriced cable TV bundle is only getting started and will see some 40% of American households ditch their service by 2030.

Generally, TDG expects that the penetration of live multi-channel pay-TV services will decline from 85% of US households in 2017 to 79% in 2030. While statistically a loss of only 7%, it nonetheless illustrates the ongoing secular decline of a once healthy market space. TDG predicts that, by 2030, roughly 30 million US households will live without an MVPD service of any kind, be it virtual or legacy.

During this time, legacy MVPDs will experience considerable subscriber losses, due not only to long-term industry trends but also growing competition from virtual pay-TV providers. Consequently, legacy pay-TV penetration will fall from 81% of US households in 2017 to 60% in 2030, down 26%. At the same time, virtual pay-TV penetration will grow from roughly 4% of US households to 14%, up 350% but from a very small base.

“TDG said early on that the future of TV was an app. Unfortunately, most incumbent MVPDs weren’t taking notes,” notes Joel Espelien, TDG Senior Analyst. “The question is no longer if the future of TV is an app, but how quickly and economically incumbents can adapt to this truth and transition to an all-broadband app-based live multi-channel system.”

As the Pew Research Center noted over the summer, while part of the cord cutting story is attributable to the growing availability of quality streaming content, another component is a simple demographic transition with only 30% of millennials aged 18-29 saying they subscribe to cable versus 61% with a streaming subscription.

About six-in-ten of those ages 18 to 29 (61%) say the primary way they watch television now is with streaming services on the internet, compared with 31% who say they mostly watch via a cable or satellite subscription and 5% who mainly watch with a digital antenna, according to a Pew Research Center survey conducted in August. Other age groups are less likely to use internet streaming services and are much more likely to cite cable TV as the primary way they watch television.

  • Women are more likely than men to say their primary way of watching TV is via cable subscription (63% vs. 55%).
  • Men are more likely than women to say their primary pathway is online streaming (31% vs. 25%).
  • Those with a college education or more are more likely than those with less education to say their primary way to watch TV is online streaming. Roughly a third of college-educated Americans (35%) say they mainly watch via streaming, compared with 22% of those who have a high school diploma or less.
  • Those in households earning less than $30,000 are more likely than others to say they rely on a digital antenna for TV viewing. Some 14% say this, compared with just 5% who live in households earning $75,000 or more.

Of course, many people wrongfully interpret the death of the cable TV bundle as a precursor the imminent demise of cable companies overall…but, as we pointed out in a post entitled “Streaming Killed The Cable Bundle: Record 941,000 Pay-TV Customers Ditch Cable In Q2,” nothing could be further from the truth as the real losers will be the weaker content providers who won’t have enough of a draw to sell their content direct to consumers when the channel bundle goes away.  Meanwhile, the cable companies will make out just fine as they will still control the fastest internet connections into the home which will become even more valuable to data-hungry consumers.

We’ve long held the opinion that the content creation and media distribution businesses are on the precipice of a major transformation.  Since the birth of cable TV, content creators (think Disney, Discovery, Scripps, AMC, etc.) have been locked in a perpetual tug-of-war with distribution companies (Comcast, Charter, Verizon, AT&T, etc.).  Up until now, content creators have been the clear winners as they’ve continued to force cable companies to carry their growing lineup of channels, many of which are awful, by effectively holding their good content hostage until distributors agree to pay for channels that they (and their customers) likely don’t want.  As an example, a company like Scripps may refuse to sign a distribution agreement with Charter for HGTV or the Food Network, unless they also agree to pay for their less popular channels like TVN, Fine Living or the Asian Food Channel.

All of which is precisely why cable customers have ended up paying for 1,000 channels when they really only watch about 5 of them.

But, that is all changing with the onset of direct-to-customer streaming.  HBO was the first to blink, then came ShowTime and now Disney has just announced that ESPN will also go direct.  What this means, of course, is that increasingly people will be able to make a la carte purchases of the media they actually value and ditch all the ‘crap’ that clever content creators have forced down our throats for years by holding their desired content hostage.

In summary, just like “Video killed the Radio Star,” streaming has just killed the cable bundle.

http://www.zerohedge.com

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