Cord-cutting is steadily, but slowly, eroding cable companies’ subscriber base. A new report shows signs that cable’s decline could accelerate.
Futuresource Consulting announced their take on the SVoD industry. SVOD is industry-speak for streaming video on demand – think Netflix and Amazon rather than YouTube and Vimeo. The analysts believe the US SVOD industry has more than 125 million subscribers. Still, the low-cost services generate a only 10% of the Pay TV industry’s $100 billion annual revenue.
Dig a little deeper into Futuresource’s announcement, though, and you’ll find some interesting indicators for where things are heading – and what it means for cord-cutters.
Penny Wise, Pound Foolish
The report says that the Pay TV industry’s growth came from “higher ARPU rather than subscriber growth.” ARPU stands for average revenue per user. What that means is that cable companies are compensating for lost subscriptions by charging the remaining subscribers higher fees.
This kind of short-term thinking by the cable industry will only accelerate the cord-cutting trend. As cable prices rise, cable subscribers are more likely to cut the cord.
Channeling Direct
Futuresource dumped a bunch of TV industry trends into one paragraph. While the growing availability of 4K UHD content is neat, the “direct-to-consumer services” and “media industry acquisitions and consolidation” will have a bigger impact on cord-cutters.
Cable became popular because it could provide more channels than traditional over-the-air broadcast. Now the content producers themselves see a benefit in going straight to the consumer by creating their own services.
CBS All Access, Disney’s forthcoming family-friendly streaming service, and the recently announced Fox Nation news and opinion service. Are just the first examples of the way networks will make money from their most dedicated fans.
Chris Casper is a former tech industry product manager who escaped from California for New Mexico. Now he writes about science and tech while searching for the perfect green chile sauce.
