The Cord Cutting Trend Line

I came across an interesting research report from a private note from UBS research. This study looks at the US market and goes into detail on what is happening with traditional Pay TV from a company like Comcast, Dish, DirecTV, etc., and streaming services like Hulu, Sling TV, YouTubeTV, etc. While I can’t share the whole report, I want to dive into two charts from the study.

What these charts estimate is the losses in traditional video subscriptions and the increases in streaming video services. As you can see from Figure 1, declines were modest really starting in the second quarter of 2015, it has been accelerating as of late and that trend line moving closer to 4% a quarter looks to be reasonable by early 2018.

Figure 2 looks at the net losses (estimated) and net gains (estimated) between traditional TV and streaming TV services. What is clear, is traditional TV is losing subscribers every quarter in the range of 500,000-700,000 people, and streaming TV services appear to be gaining around the same amount per quarter. The report estimates total streaming TV subscribers at 2.7m in total at the end of 2Q 2017. I share that number just to put into perspective the hard number of people who are what we would consider true cord cutters who pay for a TV service from a service like SlingTV, Hulu, DirecTV Now, PS Vue, and YouTubeTV. We talk about people truly cutting the cord and dropping their bundle in favor of streaming bundles, but the reality is not that many people have done so. Certainly, some consumers can get by with just a Netflix subscription and perhaps a base plan from Hulu (not the streaming live TV service), but the masses are still consuming cable either basic free over the air via an antennae or paying a service provider like Comcast, Dish, DirecTV, Charter, Cox, etc.

From my own experience living off just Hulu, YouTubeTV, and SlingTV, I can say I’m not convinced what they offer today is the answer. While the cord-cutting trend is continuing and losses in the hundreds of thousands and soon millions per quarter are moutning, I’d be genuinely curious what percentage of folks leaving cable for a streaming bundle want to go back to their cable bundle at some point. In conversations I’ve had with consumers looking into leaving their cable bundle for a streaming bundle, more often than not, the cable or satellite company does everything they can to keep the customer and ends up offering them such a low rate it makes no sense to switch. True, in two years time that bill will hike but again the opportunity to negotiate down will exist. I keep my Dish bill at $80 bucks a month by threating to leave when they try to raise the price.

No doubt, this is a headache most people don’t want, but my question about going back is rooted in two things. First a massive channel lineup. I’ve had a hard time finding a streaming TV bundle that has all the channels I want, and lets me watch my sports teams out of market. As I have mentioned in past articles, I’ve felt YouTubeTV was the best offering of the bunch with Hulu’s Live TV service a close second. However, on our recent vacation to Hawaii, I could not stream game 5 of the Warrior vs. Cavaliers finals game because I was out of my home market and thus blocked out. Given that I still pay that $80 bill to Dish I was able to open the ABC app and watch the game. So that $40 extra per month to Dish lets me truly get the content I want WHERE I want it.

The other thing that extra $40 dollars a month gets is the DVR to skip commercials. While Hulu does have a no commercial offer of their Live TV service for $40, it still lacks all the channels, some sports rights, out of market watching of live content, and more. Where for $30 for YouTubeTV you get a cloud DVR of shows but still have to watch the commercials. I’ve found having to sit through anywhere from four to six commercials just trying to stream a show extremely frustrating. Once you have had the ability to skip commercials it is very hard to go back to having to sit through them. I have to imagine many of those switching from a cable service with DVR and commercial skipping feel the same pain when moving to a streaming TV service.

As the report indicates, and many other data points we have suggest, we are certainly seeing this trend gain steam. There are no doubt trade-offs to the skinny bundle that you don’t fully realize until you have tried it. For this reason, I’ll be curious where this trend line is in a years time. Keeping in mind the cable companies won’t sit still will still compete for your business. If anything, the rise in popularity of streaming TV services are good for competition and thus good for consumers. I’m totally fine with an all-out price war between cable companies (who have had a monopoly for too long now) and streaming TV services.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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