Cord-Cutting Predicted to Accelerate - Can Cable Survive?
More people are choosing to “cut the cord” and subscribe to streaming services that offer on-demand and live content. In 2020, amid the pandemic, the pay-TV sector saw record losses. Now, S&P Global Marketing Intelligence expects cord-cutting to continue to accelerate over the next year.
In 2019, pay-TV subscription losses were at 7.3% but slowed down in 2020 at a rate of 7.9% after a dip later in the year. S&P expects the rate to increase again this year and says this is because the cable sector is “increasingly indifferent as to whether unprofitable customers get their video service from cable companies or a third-party service.”
The cable sector’s subscription loss rate is estimated to grow from 4.6% in 2020 to 6.6% in 2021. The loss rate varies by company size, but larger cable companies are seeing the most losses.
- Large companies: 3.8% (2020) to 5.8% (2021)
- Midsize companies: 9% (2020) to 10% (2021)
- Small companies: 10.8% (2020) to 10.5% (2021)
S&P explains the importance of local TV stations and broadcast networks in bundles. The report states, “Regional sports networks, which depend on broad distribution to overcome steep sports rights fees, and premium cable networks, which face cannibalization from streaming services, are most vulnerable to cord-cutting. The ultimate impact to individual companies’ operating and credit metrics depends on the specific media company. This assessment isn’t uniform because most large media companies have diverse business operations, including growing streaming DTC services that benefit from the decline in legacy television.”
S&P expects the loss rates to continue to grow, as many Americans are continuing to choose streaming services over cable. According to a CBS study, 63% of Americans used cable or satellite to watch TV in 2016, but now that number has dropped to 45%. The number of people who now use streaming services has grown from 20% to 37% in the past five years.
Streaming is more popular with the younger crowd, while most Americans over 45 still use cable or satellite.
Overall, the number of Americans using streaming services has grown among all age groups.
It looks like streaming is the preferred way to watch content, and it’s expected to stay that way. S&P predicts that vMVPDs, such as YouTube TV and Sling TV, aren’t enough to stop the decline. When vMPVDs first hit the market, their offerings were slim, but they are expanding to mimic traditional cable packages now.
Broadcast TV elements, including local TV and broadcast networks, may be able to keep pay-TV subscribers around, but it’s unclear how long that will last. When sports become more widely available on streaming platforms, the pay-TV loss rates will accelerate.
Related: Cord Cutting 101