One in eight to cut cable and satellite TV in 2010
NEW YORK (CNNMoney.com) — Despite rising cable and satellite TV prices and easy access to streaming TV and movies on the Internet, few consumers have cut the cord. But that looks like it's about to change.
Context & Ripple Effects
The cord-cutting story has been building for a year: the Wall Street Journal reported households dropping pay TV back in May 2009, and two weeks ago TechCrunch put a number on the web-only exodus with an estimate of 800,000 U.S. households abandoning their TVs for the Web. Until now, though, the consensus — echoed in this piece — was that rising cable bills annoyed people without making them leave.
What changes with this report is the scale of the forecast: one in eight consumers expected to cancel cable or satellite service within 2010, which would turn cord-cutting from a statistical curiosity into a measurable dent in the pay-TV base that operators first saw eroding last year. The Silicon Alley Insider pickup under the headline that apps and the Internet will crumble the TV business shows the thesis has traveled beyond the business press.
First-order effects
- Cable and satellite providers face their first year of meaningful subscription losses rather than churn-and-replace growth, directly hitting the subscriber counts that fund both carriage revenue and affiliate-fee negotiations.
- Consumers substituting Netflix-style streaming and over-the-air reception for a monthly bill keep roughly the same entertainment diet at a fraction of the price, validating the substitution the article describes.
Second-order effects
- Content owners whose economics depend on per-subscriber affiliate fees lose bargaining leverage as the addressable pay-TV base shrinks, pressuring them to license more catalog directly to streaming services — feeding the very substitutes draining their distributors.
- Pay-TV operators are pushed toward counter-moves on price or bundling discipline, since annual rate increases that were routine when subscribers had no alternative now accelerate the defection they are meant to offset.
Third-order effects
- If one-in-eight defection materializes, the bundled pay-TV package — hundreds of channels priced as one product — starts structurally unbundling into Internet-delivered, on-demand viewing, shifting distribution power from cable operators toward whoever controls the streaming relationship with the viewer.
- Measurement becomes contested ground: whether cord-cutting is 'real' will hinge on dueling estimates from analysts and the industry itself, and regulators and investors will increasingly demand audited subscriber numbers rather than operator assurances.
The trend: American pay TV is crossing from anecdote into trend, as rising subscription prices and frictionless Internet streaming convert dissatisfied cable customers into cord-cutters at scale.