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Subscribers are eliminating cable faster than anyone could have predicted. While many cable subscribers have agreed to a service bundle of TV-Phone-Internet, most are now choosing to re-evaluate which services they choose to access over cable.
Cable companies are terrified by the onset of “cord-cutting,” the term that analysts have attached to the trend of people not wanting to fork over $125 a month for a mostly-useless cable TV-phone-Internet package. Cord-cutting has the potential to completely change the way we watch content, by cutting out the middleman and having a more direct path directly the end user, destroying a multi-billion-dollar industry in the process.
For those who don’t want – need – or even care about getting 75 to 100 cable channels in their cable-TV subscription, “down-subscribing” or even eliminating their cable is becoming a very appealing decision to make.
And with the rise of Cell Phone usage, many people no longer need their regular phone service. Whether that phone service was part of a cable bundle delivered as Voice Over Internet Protocol – VOIP, or through a traditional land-line, the trend is to become strictly a cell phone user and eliminate the traditional handset altogether.
If you’re the exec of a cable company and that sounds like bad news, it’s about to get worse. A new report by eMarketer shows that ad revenue on traditional TV is down compared to last year, and the number of people expected to cut the cord in 2017 alone is up to 22.2 million. Yikes.
According to the report, there will be 22.2 million cord-cutters age 18 or older this year. That’s up 33% from the previous estimate of 15.4 million, and represents billions in lost revenue for the cable industry. “Audiences continue to switch to either exclusively watching online or streamed video or watching them in combination with free TV options,” said Chris Bendtsen, senior forecasting analyst at eMarketer. “Last year, even the Olympics and presidential elections could not prevent younger audiences from abandoning pay TV.”
The news gets worse when it comes to the bottom line. The slowdown in TV viewing is reflected in TV ad spend, which is projected to drop to 34.9% of total ad spend by the end of 2017, and below 30% by 2021. “Traditional TV advertising is slowing even more than expected, as viewers switch their time and attention to the growing list of live streaming and over-the-top [OTT] platforms,” said Monica Peart, eMarketer’s senior forecasting director.
Plus, all of the major networks offer day-after streaming of their popular TV shows. YouTube TV, Sling, Hulu, and PlayStation all have good, cheap streaming alternatives, with fancy tech features like unlimited cloud DVR. Standalone subscriptions to Netflix, ESPN and HBO eat away at the premium TV market that cable used to be essential for.
And if all you are interested are the traditional network offerings (NBC, ABC, CBS, FOX, etc.) then an Over The Air (OTA) antenna will bring you about 20 high definition channels, many the same as what you would get with a Basic cable subscription. And because the cable signal is compressed for delivery, the OTA signal by design, is a higher quality signal resulting in a better picture. How’s that for an alternative for watching programming???
The one area that cable growth seems to be stable is with Internet service. As infrastructure upgrades from cable to fiber optics, the delivery download speed will skyrocket, leaving DSL and satellite behind. Comcast, for instance, plans to make up its loses from Cable TV and VOIP phone service with increased pricing for Internet speeds five times as fast as currently delivered.
Overall, it’s bad news for the cable industry. Despite lackadaisical attempts to transition to the new way of doing business, it’s just a harsh reality that streaming services are going to lead to more competition, and ultimately lower profits for the companies providing the content. No wonder they’re pushing to end net neutrality laws.
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