According to the Diffusion Group (TDG), more than half of cord cutters cancelled their legacy pay TV service in the two calendar years of 2015 and 2016, with one-third cancelling service in 2016 alone.
Michael Greeson, co-founder and principal at TDG, attributed the uptick in cord cutting to high prices and the rise of on-demand OTT video services. TDG expects the threat of cord-cutting to continue to haunt operators for some time, even as video ARPU among existing subscribers heads south.
The use inexpensive on-demand streaming services like Netflix (NASDAQ:NFLX) and Amazon Prime (NASDAQ:AMZN) has gone mainstream, triggering many legacy subscribers to reassess the value of traditional TV services.
"Spending $70+/month for service that provides 2X value seems odd when you can pay $10/month for a service with 1X value," said Greeson. "The calculus of today's TV subscriber has been radically altered by the presence of SVOD services like Netflix."
Also, video streaming has evolved to include a growing variety of live linear services that mirror the offerings of legacy providers but are customized to individual viewing segments.
"Whether from independents (Sony Vue, YouTube TV, Hulu) or from incumbents (DirecTV Now, Dish's Sling TV), consumers now have greater flexibility in deciding for which channels they receive and pay," Greeson said.
Most incumbents (Comcast being the important exception) are rushing to skinny bundles, which TDG regards as a trap: racing to the bottom in terms of price and selection to save subscribers without understanding the long-term consequences of the strategy.
"True, market conditions are challenging, but many incumbents are blindly hastening the pace at which the value of robust fully priced TV packages declines," Greeson said.
Greeson cited Comcast as an example of a company doing well in the new age of quantum media.
"TDG observed long ago that incumbents were going to have to make a choice: Either resign themselves to being a 'dumb-pipe' provider or invest in using IP, change the TV experience, and become the go-to source for all things video. Comcast tuned into the latter, investing in the hardware and software required to bring the power of IP to the legacy TV experience, and the company is now gaining video subscribers when others are reporting loses."
