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Connected Households Increasingly Opting out of Subscription TV

“It’s never been easier to cut the (TV) cord.” How many times have you read, or heard, this statement? With ubiquitous Internet-delivered video providing tremendous latitude, and at very competitive rates at that, the threats to existing video providers and opportunities for new entrants continue to mount.

SNL Kagan’s data shows that an overwhelming majority of American households continue to find value in the traditional multichannel video bundle but that an increasing number chooses to subscribe only to broadband Internet. Those homes more often than not fill their video needs with OTT services and/or over-the-air broadcast TV.

In the third quarter, non-multichannel broadband homes, defined as households without a traditional multichannel video package but subscribing to wireline high-speed data, hit a new high, coming in at an estimated 12.9 million. This is up more than 19% annually.

Factors including an expanding broadband subscriber base, dwindling multichannel affordability and over-the-top video availability suggest the segment will remain on an explosive growth path in the foreseeable future.

The rise of broadband Internet in the mid-2000s provided the environment necessary for the emergence of OTT pioneers Netflix and Hulu. With the services growing in popularity, the demand for expanded bandwidth and faster speeds increased, making the Internet soil even more fertile for would-be OTT entrants. 

Broadband Internet/OTT Feedback Loop

Today, the proliferation of streaming services makes it easier than ever to cut the cord; hence the rapid rise in non-multichannel broadband households.

For programmers and legacy multichannel providers, this is a market to tap into, which explains the multiplication of streaming services. This trend, however, reinforces the feedback loop described above.

The long-term effects of the strategy are difficult to predict. There are risks of cannibalization. It also increases the pressure to come up with highly sought content. Barriers to cancellation are lower outside the traditional multichannel bundle, and subscribers are more likely to cancel when their favorite show ends.

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Mar 09, 2016
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