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Cord-cutting is hitting the cable companies where it hurts most: Money

Published Apr 18th, 2018 9:01PM EDT
Cord-cutting vs cable 2018

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As it’s been extensively documented for the last year, cord-cutting streaming services are coming for the cable companies. Pay TV subscriptions are down by record numbers nearly every quarter, more and more people are subscribing to TV services, and the “never cable” generation is growing up and replacing their cable-subscribing parents.

But so far, one thing has bolstered the traditional pay TV industry: revenue. Streaming services are much cheaper than cable or satellite bundles, so even if the new services are stealing subscribers, the rate of decline of the cable industry is still disguised by fat bottom lines. According to the 2018 ” Battle for the American Couch Potato” report from Convergence Research Group, that’s not going to be the case forever.

Convergence’s annual report, which is now in its 12th year, highlights the difference in revenue growth between the streaming and traditional pay TV industries:

We estimate US OTT access revenue (based on 55 OTT
providers led by Netflix) grew 41% to $11.9 billion in 2017,
forecast $16.6 billion for 2018, and $27.6 billion for 2020.

We estimate 2017 US Cable, Satellite, Telco TV access (not
including OTT) revenue grew 1% to $107.6 billion ($94.30/mo.
ARPU), and forecast $107.4 billion (97.90/mo. ARPU) for 2018.

Streaming service revenue grew by 41% last year, while pay TV flatlined in real terms. Given a few years, the analysts expect pay TV to be in revenue decline, and streaming services to be way up. The only reason traditional pay TV revenues aren’t in free-fall already is because prices (especially including fees!) have been steadily creeping up while the quality of programming is staying the same, and with the number of cheap streaming services entering the market, that’s not a sustainable business model.

The report also predicts the effect that this will have on the industry. “The gloves are off,” it proclaims, saying that “programmers now directly compete against their traditional TV access and independent OTT buyers that rival in terms of content spend. Amazon, Apple, DAZN, Facebook, Google and Netflix all have the money muscle to finance their own productions or outbid on programming including major
sporting franchises. “

It also predicts that programmers are going to move more and more towards direct-to-consumer business models, rather than going through resellers. Disney is planning a direct-to-consumer Netflix competitor to launch next year, and direct streaming services like HBO Now and CBS All Access are becoming increasingly popular.

Chris Mills
Chris Mills News Editor

Chris Mills has been a news editor and writer for over 15 years, starting at Future Publishing, Gawker Media, and then BGR. He studied at McGill University in Quebec, Canada.