The brutal advance of cord cutting by Americans who watch entertainment, sports and news on TV will further wound traditional cable and satellite providers. According to new research, one in five households will no longer have subscriptions to these traditional conduits of video by 2018. The evolution will be catastrophic to cable content providers like ESPN, a worry already spreading the industry.
Research firm eMarketer comments on the pace of cord cutting:
A growing percentage of American households are cutting the cable TV cord each year, according to eMarketer’s first forecast for the pay TV market. In 2015, there will be 4.9 million US households that once paid for TV services but no longer do, a jump of 10.9% over last year. And that growth will accelerate in the coming years, with the number of cord-cutting households jumping another 12.5% in 2016. In fact, by the end of next year, the number of US households subscribing to cable and satellite will drop below 100 million.
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The cable and satellite problem extends beyond cord cutters to another set of viewers:
Also noteworthy, the share of viewers who have never subscribed to cable or satellite (“cord-nevers”) is growing as well. This year, the percentage of US adults who have never subscribed to cable or satellite TV will reach 12.9%. That share will grow to 13.8% by 2016.
Some companies that rely on fees paid by cable TV will start to shrink. Walt Disney Co.'s (DIS) ESPN already has begun layoffs. It is one of the most profitable sets of channels in the industry. Other channels, which include Time Warner's (TWX) HBO, have made their content available to cord cutters via broadband for a fee. However, this move may not bring HBO nearly enough revenue to make up for what its loses in cable fees. It may take years to show how the sales and profits from the new model will work.
As the cord cutting trend increases, at least according to eMarketer forecasts, cable TV content providers may have no other option but to cut costs to keep up with falling revenue. ESPN is only the beginning.