After Disney’s recent announcement about building a pair of video streaming services – one is an ESPN-branded platform and the other is Disney-branded – to accelerate its “direct-to-consumer” initiative, there has been an uptick of chatter over cord-cutting in the news. The topic is getting almost as many hits as ‘John B. McLemore’ when the S-Town podcast premiered in March or when the Dothraki crossed the Narrow Sea. Although Disney currently holds the spotlight, the shift to streaming has been in the works for well-over a decade, and it was (surprisingly) CBS who deserves credit as the true trailblazer among large media after All-Access was launched back in 2014.
This cord-cutting trend should come as no surprise given that nearly two-thirds of all households in the U.S. subscribe to a service like Netflix, Amazon Prime or Hulu, up from less than 50% three years ago. In addition to the aforementioned “streamers,” Facebook, YouTube and even Twitter are offering live streaming options, while virtual pay-TV providers like Sling make switching extremely affordable for customers uninterested in traditional plans.
In essence, cord-cutting is truly just beginning as households start to question why they’re overpaying for cable, especially when considering the average household doesn’t view over 90% of the channels to which they have access, and recognizing that their monthly charges have risen too quickly. For example, the average household paid $100 a month to cable companies in 2016 compared to just $70 in 2011, a 43% increase or 6X the inflation rate!
While cord-cutting is not a new phenomenon, it really started to accelerate in 2016 after 1.9 million pay-TV customers cancelled their contracts. Prior to last year, the attrition rate was around 1 million a year. This higher pace is expected to continue as media think-tanks estimate that at least 10 million more customers will follow suit over the next 5 years. As a result, M&A within media has been a common theme throughout 2017; AT&T is acquiring Time Warner, Sinclair – one of the country’s biggest local television station owners – is in the process to buy Tribune and Starz was approved to be taken-out by The Hunger Games and La La Land producer, Lionsgate. This consolidation likely continues.
Part of the draw beyond availability is due to the better quality of content being developed by streaming providers with shows such as Westworld, House of Cards, Orange is the New Black, Transparent and Ozark (Catamount’s newest obsession on Netflix – hop on the train, people! Another suggestion that will not disappoint: The Jinx on HBO. Anyway, we digress…). And have you heard that Shonda Rhimes, Grey’s Anatomy and Scandal producer for ABC, is bringing her creativity to Netflix after being with the network for 15 years? This move potentially raises the bar even further. Perhaps we should all get more comfortable couches.
We’re in the midst of a media boom today and the most obvious winners from this dynamic will be consumers as Americans still have a habit of sitting in front of the television. With the explosion of high quality content and more outlets to view the next hit show about vampires or a behind-the-scenes documentary featuring René Redzepi’s next Danish creation (can one of our readers please make this happen?), media companies have recognized that the model needs to evolve. Unfortunately, we are still a long way from seeing how it settles beyond plain, old “bundling.”
The next buzzword to watch for in media? Cord-nevers. You heard it here first.