Streaming becomes mainstream as cord-cutting accelerates
Streaming becomes mainstream as cord-cutting accelerates
By Robert Channick December 26, 2017 2:20 PM
Cord-cutting is not just for millennials anymore.
Fed up with high prices and bloated packages, millions of
Americans cut the cord on cable TV in 2017, finding refuge with a growing
number of streaming services, which deliver lower prices and a competitive
channel lineup over the internet.
“This was really the year that cord-cutting went
mainstream,” said Craig Moffett, a senior analyst at the research firm
MoffettNathanson. “It was mostly based on the availability of compelling
services.”
Internet television, also known as over the top, bypasses
cable and delivers video directly to viewers through a broadband connection.
Major players include subscription video-on-demand services such as Netflix,
Amazon Video and Hulu as well as livestreaming services such as Sling TV and
DirecTV Now, which air dozens of cable channels in real time.
Once an idle threat customers used to squeeze a few free
months of HBO out of cable providers, cord-cutting accelerated in 2017 as
disruption in the pay-TV industry reached critical mass. New streaming services
launched, subscriber growth skyrocketed and more media companies took the
plunge to ensure their programming found viewers online.
“The genie is out of the bottle, and it’s not going to be
put back in,” Moffett said. “The media companies are now dependent on the
(over-the-top) providers to sustain their distribution, so they have no choice
but to steam forward and make their content available.”
Traditional pay-TV providers — cable, satellite and
telephone companies — lost 1.7 million subscribers in 2016, and the pace is
accelerating, with more than 2.6 million cutting the cord through September of
this year, according to MoffettNathanson.
At the same time, virtual distributors gained more than
1.7 million subscribers this year through September.
While their ranks are shrinking, there were nearly 94
million traditional pay-TV subscribers in the U.S through September, according
to MoffettNathanson, versus about 3.5 million subscribers for fast-growing
virtual services.
Michael Napier, 29, a market researcher who lives in
Chicago’s Loop, is one of them. He cut the cord during the summer and isn’t
looking back.
“I had Comcast for a long time, and the bill just kept
rising on me, so I switched to Hulu Live TV,” he said.
Napier still gets internet from Comcast, but he is saving
about $15 over his $160-per-month cable and broadband bundle with the nascent
Hulu Live streaming service. He supplements his service with Netflix, Amazon
Prime and a TV antenna to watch the Cubs on WGN-Ch.9 over the air for free.
Sling TV broke new ground when Dish Network launched the
service in early 2015 as a slimmed-down streaming alternative to satellite and
cable services. Last fall, competing satellite provider DirecTV, owned by
AT&T, launched its own streaming service, called DirecTV Now.
PlayStation Vue also was early to the game, launching its
live streaming service more than two years ago, but the livestreaming category
blew up in 2017 with new offerings from Hulu and YouTube joining a suddenly
crowded field.
YouTube TV went live in April in five markets, including
Chicago, and has since rolled out to dozens of cities across the U.S. Hulu Live
launched in May.
Streaming devices such as Apple TV, Google’s Chromecast
and Roku make streaming services feel very much like cable, easing the
transition for cord cutters. But for many, the biggest reason for taking the
plunge into streaming is price. The average cost to subscribe to traditional
pay TV is more than $100 per month, while the average bill for a streaming TV
service runs $35 to $40, on top of the cost of an internet connection.
A report published this month by digital video recorder
manufacturer TiVo found that 85 percent of cord cutters cited bills that were
too expensive as the primary reason for canceling their traditional TV
subscription.
“There was never any question that if a customer could
get their pay TV subscription for $35 instead of $100 that there would be a lot
of people who would want to do that,” Moffett said. “Now it’s an available
option, and so you’re seeing a lot of the pent-up demand finally being met.”
August Etsch, 31, a banking associate from Chicago’s
Bucktown neighborhood and longtime Comcast cable subscriber, made that very
calculation when he cut the cord in June.
His $160 monthly bill included broadband, video and
landline phone service, which he never used. Etsch scaled down to an
$80-per-month broadband plan with Comcast and signed up for streaming TV with
PlayStation Vue.
“By doing that, we’re saving about $30 to $40 a month,
while we still have most of the channels we were watching,” Etsch said.
Etsch also adds subscription video-on-demand services
Netflix, Amazon Prime and HBO Go to his homemade bundle, all of which he
accesses through PlayStation Vue. He is far from alone.
Netflix topped 100 million subscribers worldwide this
year, while its original series “Stranger Things” drew nearly 16 million U.S.
viewers during the second season’s opening weekend in October, according to
Nielsen, rivaling major cable hits such as AMC’s “The Walking Dead.”
Derek Higa, a media analyst at equity research firm
William O’Neil, is bearish on traditional pay-TV providers and bullish on new media
companies such as Netflix.
“Netflix is spending a lot on content,” Higa said. “We
feel this is what is needed … to limit the churn of subscribers and maintain
leadership in this space.”
With video subscribers falling, the cable industry
increasingly has staked its future on building out high-speed internet
networks, driving much of the growth as U.S. broadband subscribers topped 94.5
million at the end of the third quarter, according to Leichtman Research.
Owning the pipeline to streaming TV services may be even
more valuable in the wake of the Dec. 14 decision by the Federal Communications
Commission to roll back Obama-era net neutrality regulations ensuring equal
access to the internet. The regulatory approach adopted by the FCC gives
broadband providers latitude to charge more and limit access to certain
websites.
In theory, that would allow Comcast and other broadband
providers to make it more expensive to stream Netflix content while holding
down rates for their own streaming video services.
In a statement issued after the FCC ruling, Comcast said
it “does not and will not block, throttle, or discriminate against lawful
content.”
Netflix posted a statement on Twitter calling the FCC
decision to “gut” net neutrality protections “misguided” and said it was the
beginning of a longer legal battle over the issue.
While streaming TV has broadened its reach, millennials
are still more likely to cut the cord than baby boomers, said Bruce Leichtman,
president and principal analyst for Leichtman Research.
“We see significant demographic differences by age, by
income,” Leichtman said. “The decision (to cut the cord) … is much more common
among younger people.”
Leichtman said the pay-TV market is nonetheless evolving,
and the pace of evolution for cord-cutting will not slow.
The hardest part for would-be cord cutters of any age may
be getting through the cancellation process. Expect traditional pay-TV
providers to break out promotional packages, bring in retention specialists and
stretch out the call.
Mike Fisher, 34, a consultant who lives in Chicago’s
South Loop, said he has been trying to cut his cable cord and winnow down his
$200-per-month bill for about four months, but he has yet to successfully make
it through the cancellation call with Comcast.
He is steeling himself to get it done before the new
year.
“You just get bounced around and put on hold for a long
time and after a half-hour, 45 minutes, I just hang up and get discouraged,”
Fisher said last week. “It’s just a difficult and onerous task.”
Copyright © 2017, Chicago Tribune
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