800,000 People Will Cut Cable Cords in the Next Year

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Cable cutting is costing cable companies and cable stations big time. The anxiety particularly swirls around operations like ESPN, owned by Walt Disney Co. (NYSE: DIS). The channel represents billions in revenue for the multimedia public corporation. Some channels have started to offer their own direct-to-customers services, and research firm cg42 projects 800,000 people will cut cords in the next 12 months, which will cost the pay-TV providers $988 million.

The reasons for cutting cords are compelling, the firm explains in its Cord Cutter Survey:

Top 5 Frustrations Driving Cord Cutting:

  1. Not getting competitive / reasonable rates / pricing
  2. Having to pay for channels / content I don’t watch
  3. Being nickeled and dimed with multiple fees and charges
  4. I could no longer afford Paid-TV / it was too expensive
  5. New customers getting better deals than existing ones

Most of these cannot be overcome unless the pay-TV business radically modifies its model, which would put too much of its traditional revenue at risk.

The danger is particularly acute do to two industry giants — Amazon.com Inc. (NASDAQ: AMZN) and Netflix Inc. (NASDAQ: NFLX) — that happen to being pouring money into original content, which is one of pay TV’s biggest strengths:

Unsurprisingly, the most popular paid streaming service among Cord Cutters and Cord Nevers is Netflix with 94% of respondents currently subscribing. Beyond Netflix, other paid streaming services have significantly lower market penetration. Amazon Prime Video, the second most popular paid streaming service, is used by only half of respondents. YouTube’s free service is equally popular to Netflix among consumers, but their premium paid offering is used by only 4% of Cord Cutters and Cord Nevers.

Cord nevers are people the industry never had as customers, and who have a pattern of habits all their own.

Top 5 Reasons Why Cord Nevers Do Not Subscribe to Paid-TV:

  1. Paid-TV is too expensive
  2. Streaming services allow me to view content based on my schedule
  3. I don’t want to pay for channels / content I don’t watch
  4. I get a much better deal by using streaming services
  5. Streaming services allow me to watch back to back episodes of my favorite show

Given those reasons, it is surprising the attrition is not faster

+ Online survey of 1,119 US consumers
+ 759 Cord Cutters (cut the cord in the last 2 years)
+ 360 Cord Nevers
+ Sample is representative of US market
+ Field dates: July 25 through August 1, 2016