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$1bn threat to pay TV

News, 29 September 2016

NEW YORK: Pay TV companies could lose close to $1bn in revenues in the next 12 months as a growing number of consumers choose to “cut the cord”, a new study has calculated.

A report from consulting firm cg42, based on an online survey of 1,119 US customers, estimated that 800,000 cable subscribers will end their subscriptions over the coming 12 months.

And, doing the math, since the average cord cutter saves $104 a month – or $1,248 a year – that equates to $998.4m. That's small in the context of the total pay-TV industry, the Wall Street Journal noted, but it is a warning sign.

The report also debunked the notion that consumers could end up paying more as they opted instead for streaming services like Netflix – by far the most popular option for cord-cutters, 94% of whom subscribe.

The opposite is true, it said, noting the small difference in spending on streaming services between those people who have never had a pay-TV connection ($71) and those who are cutting the connection ($83).

“The consumer is discovering they don't need the mean, evil cable company to get the content that they want, and they can get it for a better deal,” said Steve Beck, managing partner at cg42.

Both cord-cutters and cord-nevers reported that they can access “most or all” of the content they want without a pay-TV subscription, whether that means going to a bar to see a sporting event or viewing YouTube clips of late-night chat programmes the next day.

And the cord-cutters won't be coming back any time soon – the report found that contentment without cable or satellite “increases the longer they are away from paid-TV”.

On the other hand, there are a significant number of cord-nevers who could step in to replace them: 6% of this group – which constitutes some 16.9m households – indicated they were “very or extremely likely” to subscribe to cable in the coming 12 months as their buying power grows.

Data sourced from wall Street Journal; additional content by Warc staff