Cord cutting is now a firmly entrenched component of the pay TV business, especially in the U.S. Pay TV providers of all kinds continue to shed subscribers each quarter, all against the backdrop of a continually expanding streaming market. However, the real story behind cord cutting is not how many people are doing it but who is doing it. In this column, we highlight findings from MIDiA’s Q3 Cord Cutting report, deep diving into cord cutting both from a supply and a demand side, profiling cord cutters and identifying which streaming apps are having the most impact.
The third quarter of 2018 witnessed an acceleration in U.S. cord cutting compared to previous quarters, reaching its highest level since the second quarter of 2016. A net total of 1 million U.S. pay TV subscribers cancelled their subscriptions in the third quarter. This is a secular trend and a growing one, with 1.7 million subscribers lost already this year, compared to 1.3 million at this stage in 2017. However, cord cutting is a symptom, not a cause; it is the effect of traditional pay TV subscribers jumping ship to streaming alternatives.
- SVOD users are the driving force behind cord cutting: 71% of U.S. cord cutters in the third quarter were SVOD users. While traditional pay TV and SVOD can coexist for a long time in many households, what is now clear is that a blend of streaming services is compelling enough to persuade consumers to cut the cord. 39% of cord cutters in the third quarter had more than one video subscription, compared to an all-consumer average of 11%.
- Amazon users lead the cord-cutting charge: Unsurprisingly, all SVOD app users over index for cord cutting, with Amazon Prime Video having the highest rate: 12%. Hulu is close behind on 11% and markedly ahead of Netflix on 8%. This should be giving traditional pay TV operators pause: the TV networks’ attempt to take on the streaming insurgents is now a key driver of cord cutting. The inference is clear: TV networks are banking on maintaining their audiences, not on shoring up long-held relationships.
- Binge viewing is the early warning sign: All digital services and apps aim for one thing: to create habit-based behaviors among their users. For streaming, that behavior is binge viewing. It is now emerging as an early warning indicator for cord cutting. Pay TV subscribers that use TV Everywhere apps to binge watch are at-risk consumers. Third-quarter cord cutting penetration was third highest among binge viewers—10.2%—while cord shavers were second highest at 9.4%. Most importantly, binge viewers represented 58% of all third-quarter cord cutters.
- Cord cutters are younger than cord shavers: Third-quarter cord cutters were 41 years old on average, with 38% of them aged 45 and over. This contrasted with an average age of 44 for cord shavers, of whom 41% were 45 and over. Cord cutters are younger, more tech-savvy consumers who are less wedded to their pay TV subscriptions, while cord shavers are older, more cost-conscious and less willing to make the full jump.
- Sports not locking subscribers in: Sports still plays a major role in the traditional pay TV proposition, but with streaming companies building out their own sports offerings, more sports fans are proving willing to cut the cord. 59% of cord cutters in the third quarter regularly watch sports, compared to 39% of overall consumers. But, crucially, 30% of cord cutters stream sports for free—including from illegal sites, which is over three times the all-consumer average.
- SVOD originals are playing their part: Fans of SVOD originals over index for cord cutting: for example, 14% of “Man in the High Castle” fans were cord cutters in the third quarter, compared to 9% of “Game of Thrones” fans. With a growing trend of TV networks becoming more cautious about what they license to streaming services, SVOD providers need to be doubly certain that their originals are strong enough to persuade traditional pay TV subscribers to cut the cord and commit themselves to streaming. The early indicators are that streaming is winning that fight.