Report: North American cord-cutting to slow… sorta

cord cutting pay TV

After seeing more than 12 million subscribers quit traditional pay-TV over the past two years, there is some (modest) good news in the future, according to new research that suggests the industry’s losses make have peaked and possibly will slow over the next several years.

The bad news? Pay-TV subscriber losses will continue, but at a less breakneck pace.

Direct TV Research posits that – after the industry lost more than 26.67 million subscribers between 2010 and 2020 – subscriber loss will total only 16 million through 2026.

“The worst of the cord-cutting is over,” said Simon Murray, principal analyst at Digital TV Research (DTVR). “Declines will be lower from 2021, falling by 16 million in total between 2020 and 2026.”

Murray said the biggest losses will come from satellite services, forecast to fall another 7.5 million, followed by 5 million losses among cable operators and 3.4 million subscribers to IPTV services.

The bigger picture

While the losses may slow, the long-term future of the pay-TV industry, in the face of an unrelenting onslaught of subscription and ad-supported over-the-top services that increasingly are going direct-to-consumer, remains doubtful.

AT&T, Comcast and Charter all have made it clear in their quarterly earnings calls that they’re focusing more on being connectivity companies than on their pay-TV businesses. The margins on providing pay-TV services pale in comparison to those from providing high-speed Internet.

In the eight years prior to the massive losses experienced in 2019 and 2020, operators lost an average 1.75 million subscriber a year. DTVR forecasts an additional loss in 2021 of 4.7 million subscribers, followed by five years averaging nearly 2.3 million in losses per annum… losses that will continue to stream at an accelerated rate.

Pay-TV revenues peaked in 2015 at better than $111 billion in North America. DTVR predicts revenues will drop to just $62 billion in 2026, a decline of more than 44%.

The bottom line

Pay TV started the last decade with better than 90% household penetration on North America. The study suggest that by 2026, that penetration will decline to less than 54%.

According to several researchers, more than 70% of all U.S. broadband households subscribe to an OTT service. That number jumps to better than 85% when non-broadband households are added in, household penetration that rivals the best years of pay-TV.

OTT adoption has hit cable operators hardest; they’ve seen the bulk of losses over the past decade, down 18.1 million subs. Satellite, as broadband networks have expanded and made OTT more available, have lost 12.6 million and IPTV operators, always the smallest segment, have actually added 3.9 million, mostly in Canada via telcoms.

OTT, obviously, will see more growth as broader swathes of consumers continue to discover the flexibility and scope of services available to them on every device and OTT becomes as common as pay-TV once was.

The bigger question? Does SVOD or AVOD win?

Stay tuned and stay well.

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