Television as a medium hasn’t changed a whole lot since its inception. Sure, TV’s are pencil thin and we have 900 high definition channels but overall, it’s pretty much the same. Most people tend to get their service from one of the satellite or cable companies, while others still opt for local channels through an antenna. Recently people have begun to look for more options away from the quasi-monopoly television conglomerates; these people are commonly known as cord cutters.
Cord cutters have ditched or “cut” traditional cable and have generally moved to streaming services like Netflix or Hulu for their entertainment fix. The initial movement wasn’t the easiest transition. The services around at the time functioned closer to that of “On Demand” programming. Seeing this an opportunity companies like Dish and Sony created live streaming services in 2015 allowing people to have the traditional TV experience over the internet. This facilitated an easier transition for cord cutters, paving the way for more people to make the move.
According to MoffettNathanson, an independent research boutique, in the past five years, nearly 8 million people have moved away from traditional cable and over half have done so in the last two years. In the first quarter of this year alone 762,000 have already ditched traditional! Trying to capitalize on the growing trend, companies like Google and Hulu have seen the trends and have launched their own live streaming services to rival Sony and Dish’s. On the flip side, pay for TV giants DirectTV and Comcast are scrambling to recoup lost subscribers with their own services but haven’t gotten the foothold they need, or haven’t launched yet.
The loss of subscribers is worrisome as cable conglomerates like Charter, Time Warner and Viacom are down upwards of 23% in the last month despite beating revenue and profit expectations. While dip in stock prices are less than ideal, the real problem for cable providers and networks alike is the decreased revenue from advertisement that follows. After first quarter earnings were reported most major television providers were seeing anywhere from 2-6% in decreased ad revenues. Michael Nathanson of MoffettNathanson had this to say: “Folks are really worried about the loss of high revenue-per-user video subscribers and the weak trends in the ad market”. †
At some point, something will have to give. Traditional pay for TV is nearing the end of its dominance. Can these companies adapt on the fly and retain their customers either through cheaper bundles, a la cart options or their own streaming services? Only time will tell.
† Media Investors Fret About Outlook for Ads, Pay-TV Revenue by Shalini Ramachandran and Suzanne Vranica of the Wall Street Journal