April 4, 2012
By Andrew Couts
More than 1 million US TV-watchers cut their cable or satellite service last year, in favor of Web-based options, like Netflix, new research shows.
The slow migration away from cable television to online-only options, like Netflix, picked up in 2011, with more than 1 million US TV watchers cutting their cable subscriptions last year alone, according to research (pdf) from Toronto-based Convergence Consulting. Despite this pickup in cord-cutting, researchers still say the days of Web-only TV remain far in the distance.
Since 2008, about 2.65 million people have switched from cable TV to Web-based options, concludes Convergence in its annual report, “The Battle for the North American Couch Potato.” Of those, 1.05 million cut the cord in 2011. Convergence believes the total number of cord-cutters will jump to 3.58 million by the end of 2012, meaning another 930,000 will drop their cable service this year.
As the number of people switching from cable or satellite TV to Web-based options increases, the number of new traditional TV subscribers has fallen off a cliff. Convergence research shows that cable and satellite companies added a mere 112,000 TV subscribers last year, a significant drop from the 272,000 who added cable and satellite TV service in 2010. However, Convergence’s estimated TV subscriber additions are a fraction of what other research shows. According to a study by the Leichtman Research Group, the number of new cable and satellite subscribers in 2011 was around 380,000.
Even if Leichtman is right, and Convergence’s estimate is far too low, things still don’t look good for cable and satellite TV business. By Convergence’s count, the number of added cable and satellite subscribers from 2000 to 2009 was about 2 million, on average — nearly 18 times more than last year. Convergence estimates that about 185,000 will sign up for a cable or satellite subscription this year.
Cable and satellite businesses aren’t the only ones facing an uphill battle. As Convergence notes, most of Netflix’s business is in “previous season” TV shows, meaning people still can’t get the same content they get from traditional television service, or at least not as soon. Additionally, Netflix’s saw its programming costs “skyrocket” in 2011, and this year, the cost of licensing content will remain “very high,” the researchers say. The only way to overcome these debilitating costs, says Convergence, is for Netflix to achieve “significant” subscriber and revenue growth — a veritable catch-22 for the streaming company, as the addition of new shows and movies is necessary to bring on more customers.