As pay-TV subs shrink, Broadband gains increasing importance in US

Americans increasingly are abandoning their legacy pay-TV services, looking to Broadband instead, a new report from The Diffusion Group says.

The researcher says that this year 14.1% of U.S. adult Broadband users will not have a legacy pay-TV service, up from 12.4% a year ago, 11.2% in 2012 and 8.6% in 2011.

TDG contends that pay-TV subscription services have already peaked in the United States and that their decline, which began in 201, will continue, adding that during the next few months – for the first time ever – home Broadband subscriptions will outnumber pay-TV subscriptions.

“Today, residential Broadband services are used in 75% of U.S. households, meaning 13 million broadband households are currently doing without a traditional pay-TV service,” notes Michael Greeson, president of TDG.

Greeson said the transition provides on opportunity for new video purveyors, whether pure-play online ventures like Netflix or the growing list of television networks going direct-to-consumer.

“Minimizing damage and maximizing opportunity presupposes an understanding of who these consumers are, what drives their decisions, and what they expect from a pay-TV service, be it legacy or online,” he added.

TDG, in its report, “Pay-TV Refugees, 2014,” said the two primary sub-groups, Cord Cutters and Cord Nevers,” have distinct demographics and watch video differently as well, requiring operators and new video concerns to target them with different packaging and pricing strategies.

While pundits will point to relatively mild declines in pay-TV numbers, the bigger issue is that those numbers haven’t been keeping pace with the growth in the U.S. population and in new household creation. In short, pay-TV penetration is declining in the U.S., as the Leichtman Research Group recently reported.

Conversely, as TDG points out, Broadband growth is accelerating rapidly and soon will reach more than 100 million users in the U.S. Some research, in fact, says that 99% of Americans already have access to either fixed or mobile Broadband.

HBO, CBS, Univision, Dish, Verizon and others already have revealed plans for over-the-top services to reach this increasingly attractive group of consumers (which include a very heavy dose of Millennials); we can expect more broadcasters, cable networks and even operators to make direct-to-consumer plays, too.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn