As many as 1.4 million U.S. households either cut their pay-TV subscription or never had one in the first place last year, a number that "appears to have markedly increased" over past years, according to analysts Michael Nathanson and Craig Moffett. The data could spell bad news for cable and satellite operators, which managed to stem the tide of video subscriber losses somewhat in the fourth quarter.
The MoffettNathanson report cited new household formation statistics from the Census Bureau, which increased the number of occupied households by 1.3 million, as precipitating their adjustment of cord-cutting figures. The new figures are the highest 12-month total recorded since 2010 and bring the cumulative total of cord cutters and cord nevers to about 3.8 million nationwide.
Nielsen said in its December Cross-Platform Report that about 2.8 million U.S. homes have broadband but do not have a pay-TV subscription. MoffettNathanson's report suggests that a million more homes fit into this category.
There was a caveat in the information, though: The analyst firm warned that the government's occupied housing data is "notoriously volatile." Furthermore, the latest pay-TV subscriber data coming in is from the fourth quarter of last year--and plenty has changed just in the first two months of 2015, with the launch of Dish Network's (NASDAQ: DISH) Sling TV over-the-top service and the anticipated launches of HBO's a la carte OTT service and Sony's virtual MVPD play.
Analysts appear to be scrambling to make sense of cord-cutting from a stew of consumer data. Parks Associates in January caused a mild furor when a survey of broadband homes returned data suggesting that as many as 7 million U.S. households would cancel their pay-TV subscriptions after services like HBO a la carte became available. MoffettNathanson's numbers for 2014 suggest a much lower cancellation rate this year, but the report didn't provide exact numbers.
Still, "A year from now, the fourth quarter may well be viewed as the calm before the storm," the MoffettNathanson post noted.
Similarly, a Sanford C. Bernstein analyst, Todd Juenger, in November, said that a 4 percent decline in total day TV viewing was due to direct competition from subscription video on demand services like Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN).
However, the latest OTT plays may not be the real danger to pay-TV operators or networks. The dark horse is a growing millennial generation of new content creators using "entirely different distribution models," Nathanson and Moffett wrote.
The rise of multichannel networks on YouTube, and the surprising popularity of live-streaming game site Twitch, are two prime examples of content distribution models that appeared seemingly out of left field, catching networks and distributors by surprise and spurring a rash of acquisitions by Disney, Amazon and others.
The way people are consuming video is changing, analysts say. "We don't believe people stopped watching stuff," Juenger noted in his report. "We believe they are watching it in different ways."
- download this MoffettNathanson report (sub. req.)
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