Sometimes new technology happens as an evolution not a revolution.
Consider how many folks of a certain age that you know still have a landline even though their mobile phone would meet all their needs. It's not a question of not understanding the technology, or even not wanting it, it's more about sticking with what has always worked.
That could explain why cord-cutting has been a slow trickle of users leaving cable for streaming services. Even though nearly all of the content available through a traditional pay-television service can be had via cheaper alternate means (mostly by combining streaming service subscriptions and an HDTV antenna) people have been slow to give up cable.
Call it stubbornness or simply not fixing what isn't broken, the major pay-TV providers only lost 385,000 subscribers in 2015, according to Leichtman Research Group (LRG). That's up from 125,000 in 2014, but in a 94 million-home or so universe, that's like Garth Brooks misplacing a single cowboy hat or Lebron James losing a pair of sneakers.
The loss of subscribers may be worth noting, but it's not a real danger to the industry. Cable is not going to die because current subscribers leave, but that does not mean Comcast (CMCSA 3.20%), Charter Communications (CHTR 3.36%), and the rest should relax. A new study from Limelight Networks called "The State of Online Video" [opens in PDF] shows that it's not existing customers, but future ones that big cable should fear. Millennials -- people who became young adults around 2000 -- are increasingly embracing streaming services, according to the report, and they are willing to cut the cord (or never have one in the first place) as long as the content they want is available through other methods. The Census Bureau defines millennials as those born between 1982 and 2000 and says there are about 83 million in that generation, more than a quarter of the U.S. population.
It's possible to subscribe to Showtime and watch it on the Hulu platform. Image source: Hulu.
What does "The State of Online Video" say?
The Limelight Networks research shows that nearly 80% of millennials subscribe to at least one over-the-top (OTT) streaming service (like Hulu, Netflix (NFLX 0.91%), or Amazon (AMZN +0.55%) Prime). That's up from roughly 68% in May 2015 and it's well above the 61% of all other age groups that subscribe to an OTT service. In addition, millennials have shown significant growth in the number of people subscribing to more than one service like Hulu or Netflix, with the biggest growth being in the five or more category.
"With 80% of the U.S.'s largest generation subscribing to at least one OTT service, Millennials are clearly making an impact on streaming video," Nigel Burmeister, Limelight Networks' vice president of global marketing, told The Motley Fool via email. "The percentage of this demographic watching 10 hours or more [per week] is also increasing -- from 15.7% the first time we issued this report in May 2015 to 22.8% now. This trend is gaining momentum and will definitely impact traditional pay-TV, even more so as consumers demand content on any device at any time, forcing cable providers to adapt."
Image source: Limelight Networks
These numbers should concern Comcast, Charter, and the rest of the traditional pay-TV industry because in addition to embracing OTT technology, almost 90% of millennials say they would cut the cord and get rid of their cable company under the right circumstances. Those circumstances include "being able to subscribe directly to the channels I want online," which was a reason 16.59% of the age group would drop cable, and "because the price keeps going up," which led the way at just over 29%.
Since cable does not appear likely to stop raising prices and more content becomes available via streaming every year, it appears that the industry should be very concerned about millennials cutting the cord or never getting one in the first place.
A slow change is occurring
Traditional cable's demise may not be inevitable. The industry has been slowly adapting to what millennials want. That means offering skinny bundles -- smaller packages of channels that cost less than traditional cable -- and making OTT services easier to access. That has been happening, but if the pace does not pick up, the younger generation has shown that it understands how to access the content it wants through means other than a traditional pay-TV subscription.
Cable has to change or as millennials set up households and make the decision whether to subscribe they simply won't. Cord-cutting has been slow, but this report suggests that at some point in the the not-too-distant future it will begin to snowball in favor of OTT services.
