×
You will be redirected back to your article in seconds

Pay-TV Losses Could Accelerate to More Than 5 Million U.S. Households per Year, Survey Indicates

There’s more evidence of a growing subscriber exodus threatening to hit the traditional pay-TV ecosystem.

In 2016, the industry dropped about a net 2 million subscribers — and an acceleration of pay-TV losses to more than 5 million annually “does not seem impossible,” RBC Capital Markets analyst Steven Cahall wrote in a report Thursday.

That estimate is based on a results of an RBC survey of 1,200 U.S. consumers, which found that around 55% of total respondents indicated they will continue to subscribe to traditional pay TV. That suggests 68 million U.S. homes “as the floor that ultimately keep the linear bundle,” according to Cahall, given that there are currently about 124 million households in the country. Currently, there are 86 million U.S. pay-TV households, per SNL Kagan.

The data “implies subscriber declines still have lots of potential downside,” Cahall wrote.

The RBC survey found that 21% of current cable, satellite or telco TV customers were considering switching to a lower-cost virtual pay-TV service (like Hulu with live TV, Sling TV or DirecTV Now).

While “virtual multichannel video programming distributors” like Hulu, YouTube TV and Sling TV are poised to grow, they’ll significantly cannibalize the existing base of traditional pay-TV customers, according to RBC’s analysis. About 15% of the addressable market for “vMVPDs” will come from legacy cable and satellite subs, with 10% from “cord-never” broadband-only households.

“We conclude that a ratio [of virtual pay-TV subscriber adds] that favors cannibalistic over incremental [growth] is modestly negative for media,” Cahall wrote. That’s because most of the broadband-delivered subscription TV packages are “skinny” bundles that strip out many channels.

The RBC study comes after research firm eMarketer this month significantly upped its estimates for cord-cutting in 2017, projecting a 33% increase in U.S. adults cancelling traditional pay TV to reach a total of 22.2 million by the end of the year. (Note that eMarketer’s figures represent individuals, not households.)

The biggest problem for traditional pay television remains consumer perception that cable and satellite TV is too pricey — and a bad value overall. Of existing pay-TV subs looking to switch to an internet-TV skinny bundle, 78% cited cost as the biggest factor.

The irony is that moving to a virtual pay-TV service may not actually save consumers money — so the rate of people dropping legacy cable or satellite may not be as high as the RBC survey suggests, once consumers calculate what they would actually pay month-to-month.

The total cost of a vMVPDs and internet service is around $100-$140 per month (assuming a price of $40 per month for an internet TV service plus standalone broadband in the $65-$100 range per month). In other words, Cahall noted, that’s similar to the cost of a cable TV and broadband bundle. Of the respondents on RBC’s survey who are current traditional pay-TV subscribers but are considering a vMVPD, 79% are paying more than $100 per month for internet and pay TV.

Still, traditional pay-TV and telecom providers suffer from a history of negative customer sentiment — subscription television and broadband are the lowest-rated categories among all industries tracked by the the American Customer Satisfaction Index. The flexibility promised by virtual MVPDs makes them more attractive than legacy cable and satellite operators, Cahall wrote.

“While they don’t necessarily save consumers much money, [internet pay-TV services] do provide more flexibility on cost due to the month-to-month arrangement, have lower switching costs between similar services and avoid much-hated ‘hidden fees’ like set-top box rental and [regional sports networks],” the RBC analyst noted.

Cahall added: “We broadly conclude that customers feel like they ‘get what they pay for’ on [virtual pay-TV services] vs. a perceived mistrust about the true cost of cable.”

Other findings from RBC’s survey:

  • Sports: 48% of respondents said access to sports wasn’t important. The 52% who said sports was “very important” or “somewhat important” was titled more toward men (59%) than women (46%).
  • Broadcast TV: 23% said broadcast networks were the most important content or platform to them, the No. 1 response (followed by “OTT” at 17% and “news” at 11%).
  • Subscription VOD: 72% of respondents subscribe to (or use) an SVOD or over-the-top service. Netflix was the most popular, with 61% of respondents saying they’re subscribers, followed by Amazon Prime Video (41%), Hulu (18%), HBO Now (13%), Showtime (4%) and CBS All Access (3%).
  • TVs per Household: Of the respondents, 29% had two TVs in their house, 22% had three, 21% had one, 16% had four, 9% had five or more — and 2% said they didn’t have any TVs. (Numbers don’t add to 100% because of rounding.)

RBC surveyed about 1,200 U.S. adults 18 and older, which skewed older — 17% of the survey’s respondents were 18-29 vs. 22% of the U.S. population, while 29% were 30-44 vs. 25% of the U.S. population.

Editor’s note: The illustration that originally accompanied this story has been removed. Variety apologizes and will not use the image again.

More Digital

  • Nancy Pelosi

    Facebook on Defensive Over Fake Pelosi Video

    Facebook faced growing criticism this week over its decision not to remove a video that was doctored to suggest that House Speaker Nancy Pelosi was intoxicated during a recent public event. The video, which has been viewed more than 2.5 million times, had been slowed down notably, giving the impression that Pelosi was slurring her [...]

  • Little-Black-Mirror-Maia-Mitchell

    Netflix Launching 'Little Black Mirror' Video Series Starring Maia Mitchell, Lele Pons, Rudy Mancuso, Juanpa Zurita and More

    To promote next month’s premiere of “Black Mirror” season 5, Netflix is launching a short video series — “Little Black Mirror,” with a cast that includes an ensemble of Latinx social-media stars. The three “mini-stories,” aimed at Spanish-speaking audiences, are inspired by the tech-dystopian universe of Charlie Brooker and Annabel Jones’ anthology series. “Little Black [...]

  • Twitter

    Twitter Permanently Bans Anti-Trump Krassenstein Brothers, Who Deny They Broke Platform's Rules

    Twitter permanently suspended the accounts of Ed and Brian Krassenstein — progressive political activists famous for trolling Donald Trump and his supporters — with the company alleging the brothers used bogus accounts to amplify their reach on the platform. “The Twitter Rules apply to everyone,” a Twitter rep said in a statement. “Operating multiple fake [...]

  • Snapchat

    Snap in Talks to License Music to Let Snapchat Users Embed Songs in Posts

    Snap wants to up Snapchat’s music game. The company has been in negotiations with music companies including the big three — Sony Music Entertainment, Universal Music Group and Warner Music Group — to license song catalogs for the Snapchat app, according to two industry sources familiar with the talks, confirming a Wall Street Journal report. [...]

  • T-mobile - Netflix - John Legere

    T-Mobile Passes Netflix Price Hike Through to Subscribers

    T-Mobile is getting ready to raise prices for subscribers who have taken advantage of its “Netflix On Us” promotion: The mobile carrier will begin charging existing customers who have participated in the promotion an additional $2 per month to account for Netflix’s recent price increase. Consumers will see their bill go up starting on 6/2. [...]

  • Oona King

    Snap Hires Google Exec Oona King as First VP of Diversity and Inclusion

    Snap continues to fill out the ranks of its revamped leadership team: The Snapchat parent tapped Oona King, most recently Google’s director of diversity strategy and a former member of British Parliament with the Labour Party, as its first VP of diversity and inclusion. King, who starts at Snap on June 11, is also the [...]

More From Our Brands

Access exclusive content