You are using an older browser version. Please use a supported version for the best MSN experience.

Pay TV’s Pain Point Gets Worse: Cord-Cutting Sped Up in 2016

Variety logo Variety 4/14/2017 Todd Spangler
© Provided by Variety

The cord-cutting storm continues to gather momentum, and the forecast is bad news for traditional cable, satellite and telco TV operators — and their programming suppliers.

U.S. pay-TV providers lost around 1.9 million subscribers last year, according to the latest research from Kagan, a unit of S&P Global Market Intelligence. Meanwhile, “virtual” pay-TV services delivered over the internet like Dish’s Sling TV and AT&T’s DirecTV Now didn’t help stop the overall sector from shrinking in 2016.

Over-the-top TV providers gained about 900,000 subscribers last year, rising from approximately 600,000 at year-end 2015 to 1.5 million at the end of 2016, per Kagan estimates. The majority of those subscribers are attributed to Sling TV, Sony PlayStation Vue and DirecTV Now but encompass all OTT linear and on-demand services.

While the gains on the OTT front would appear to be good news for cable programmers, the problem is that many broadband-targeted TV packages are stripped-down “skinny bundles” that omit many of the channels included in traditional basic cable lineup.

Google’s recently launched YouTube TV, for example, excludes big chunks of the cable universe, including Discovery, Turner, HBO, Scripps Networks Interactive and A&E. (AMC Networks is the only basic-cable group in the YouTube TV mix.)

Overall, Kagan tallied 94.7 million residential pay-TV subscribers in the U.S. as of the end of 2016, down 2% from 96.6 million a year earlier. That decline of 1.9 million is substantially worse than the drop of 1.1 million in 2015 across American pay-TV providers, according to the research firm’s estimates.

At the same time, American broadband-only homes grew much faster in 2016 — increasing by more than 2 million. Kagan estimated the U.S. had 15.4 million non-multichannel broadband homes at the end of last year, up from 13.3 million end of 2015. That suggest that 13% of the country’s occupied households make the decision not to take a traditional multichannel TV package.

And broadband-only households are expected to nearly double over a five-year period, according to Kagan, which forecasts 28 million non-multichannel broadband homes by 2021. And that projection could end up being conservative, given the speed at which cord-cutting has accelerated in just the last year.

The pay-TV industry already is trying to brace for the worsening whirlwind as more consumers are poised to cut off traditional satellite and cable TV service.

Dish and DirecTV have already planted their OTT flags. Now Comcast is planning to launch the Xfinity Instant TV “skinny bundle” across its U.S. footprint in the third quarter of 2017.

Comcast’s Xfinity Instant TV (which will require subs to have Comcast broadband service) will start at $15 per month with broadcast networks as well as HBO or possibly another premium channel. That’s designed to give the cable giant’s an answer to cheap OTT alternatives. And while Comcast’s real hope is that it provides an on-ramp to full-blown “fat bundle” pay TV, at this point that may be wishful thinking.

Pictured above: Comcast’s new Xfinity Stream app, released in February, for letting TV subscribers stream programming in and outside their homes.

Subscribe to Variety Newsletters and Email Alerts!

AdChoices
AdChoices

More from Variety

AdChoices
image beaconimage beaconimage beacon