Cable feels effects of ‘videoquake’ as Millennials drive change

Is there big trouble ahead for the pay-TV industry? According to a new study from PwC, it’s already here.

The report, part of PwC’s Consumer Intelligence Series, says the ecosystem has gone from feeling tremors of change to a full on “videoquake,” especially among younger users who are dramatically changing their viewing habits.

Nearly three quarters of respondents (71%) said they get video from the Internet, that’s up from 66% a year ago.

Pay-TV subscriptions among users 18-35 years old, for example, have declined 6% in the past year. Among 18-24 year olds, 71% of respondents said they had pay-TV subscriptions in 2014, down from 77% a year ago; among 24-35 year olds, subscriptions declined to 67% from 73%.

At the same time, Netflix subscriptions among pay-TV subscribers in each group increased; to 65% from 56% among the 18-24 year olds, and to 71% from 51% for those 25-34 years old.

It’s not just Millennials who’ve added Netflix.

PwC said that Netflix penetration in the past year among 35-39 year olds increased nearly 2X to 66% from 37%, and saw a 3X increase to 58% from 19% among 50-59 year olds.

Other alternative sources of video, like Amazon and Hulu, also saw Y/Y gains, with Amazon up 14% to 32% penetration overall, and Hulu increasing penetration 3% to 11%. iTunes, meanwhile, increased to 18% from 16%.

The transition from pay-TV to alternative sources of content is “slowly chipping away at cable” and on its “way to replacing it entirely,” PwC said.

Meanwhile, the researcher said that despite having an average of 189 TV channels from which to choose, American’s regularly use just 17 of them.

That’s created substantial demand for an a la carte option rather than bundling.

Some 41% of respondents said they’d prefer to create their own bundles, and more than half (58%) said they’d include sports as part of their personal bundle.

Not all of the news in the report was bad for operators. Nearly three quarters (73%) of respondents said the vast amount of available content on television made watching TV as good as going to the movies.

And there were opportunities for service providers, too.

Specifically live concerts and live musicals ranked highly with the more than 1,000 people PwC spoke with.

And, because of the plethora of content choices, content discovery – in the form of channel surfing – was important to 38% of users.

Still, future, however, isn’t very bright for traditional pay-TV.

Only 61% of current pay-TV subscribers – of all age groups — said they expect to subscribe to pay-TV in five years, and just 42% said they’d expect to use a pay-TV service 10 years down the road.

The report is available here.

Stay tuned.

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