The pace of cord cutting is continuing to accelerate this year, according to a new Convergence Research Group report, with 4.56 million TV households opting to ditch pay TV. By the end of the year, 34% of U.S. households won’t have a traditional TV subscription, according to the research company’s latest “Battle for the American Couch Potato” report.
In the report, Convergence estimated that the pay TV industry will see a 5% decline in pay TV subscribers in 2019. That’s up from 4% in 2018, when an estimated 4.01 million U.S. subscribers ditched their TV service. Based on the top 66 online video services, the number of streaming subscribers will actually surpass the number of traditional pay TV subscribers this year (households can subscriber to both).
The number of OTT subscribers, based on the 66 biggest OTT services, compared to the number of traditional pay TV subscribers (not including online TV bundles).
Attempts to convert cord cutters to skinny bundle subscribers won’t pay off for the industry, Convergence predicted. “With ARPU half the traditional TV average, lackluster margins, programming gaps and technical issues, live multichannel OTT provides little counter to category killers Netflix & Amazon that sell at lower price points and essentially without advertising,” the report outlined. “We believe a number of OTT plays, including large and niche, will fail due to insufficient subscriber traction, cost, and competition.”
Altogether, online video services are poised to bring in $22 billion in 2019, up from $16.3 billion in 2018, according to the report. Last year, that revenue already grew by 37%. However, even with this growth, traditional pay TV is still expected bring in more than 3 times as much money per household, and more than 4 times as much across the entire industry, as much as over-the-top video.
OTT revenue estimate based on the top 66 OTT services.
There is a silver lining for the Comcast’s and AT&T’s of this world: The continued growth of video services also drives further broadband adoption, with internet access revenue growing 7% to $61.6 billion in 2018, and similar growth expected for this year. “As the majority of TV access providers are also internet providers there are benefits to facilitating the rise of OTT,” the Convergence concluded. “Residential broadband subs first surpassed TV subs in 2017.”