More Than 5 Million U.S. Consumers Will Cease Pay TV Services in 2018

July 18, 2018
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Many analysts have predicted that Pay TV services will start to feel the crunch in a new age of digital distribution, and one New York consulting firm has released a report that adds more credibility to their ideas. According to cg42 Management Consulting, 5.4 million Pay TV subscribers will leave their service providers in 2018.

This is huge news for the industry and it could impact shareholders directly.

What’s Driving the Loss of Pay TV Subscription Numbers

The rise of digital on-demand streaming is the key factor that plays into Pay TV disconnections. Subscribers who leave their traditional services have become known in the industry as ‘cord cutters’.

The majority of cord cutters in 2018 are subscribers to competing streaming services like Netflix, Amazon, Hulu, and HBO Go.

Winners and Losers after the Change in the TV Landscape

Netflix (NASDAQ: NFLX) is one company that would gain significantly from customers who choose digital streaming over traditional Pay TV. Although Netflix stock dropped sharply this week, the company still signed up 5.2 million subscribers in the last quarter – more than any other streaming service. According to cg42, 73% of customers who disconnected their Pay TV services in the last year were subscribers to Netflix.

Amazon (NASDAQ: AMZN) is also building their own digital streaming empire, and 46% of surveyed cord cutters also used the Amazon Prime streaming service.

It’s not all bad news for the Pay TV companies. While providers like Comcast (NASDAQ: CMCSA) would lose subscribers on their traditional services, they could potentially gain new subscribers on the HULU video streaming platform. HULU is jointly owned by Comcast, AT&T (NYSE: T), 21st Century Fox (NASDAQ: FOXA), and Disney (NYSE: DIS).

This news will not surprise investors who have been following the market closely. Comcast has invested massively into the media industry, as has AT&T. The rise of Netflix has galvanized traditional Pay TV and internet service providers, as executives realize that digital streaming is the future, rather than terrestrial cable services or satellite TV services.

A company like Comcast could be hurt financially during the mid-term transition period, but investment in on-demand streaming will provide security and even potential growth for the future.

 

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