Big cable has a big problem.

Cord-cutting cost the industry 1.1 million customers in the third quarter on top of the 415,000 it lost in Q2 and the 305,000 it dropped in Q1. That's 1.82 million through three quarters -- more than the 1.49 million it lost through all of last year.

In reality, the picture is actually worse since internet-delivered services (which are generally cheaper and less profitable than traditional cable or satellite) have grown to over 4.2 million homes. That means that while it looks like the cable universe has shrunk from 95.2 million homes in 2014 to about 90 million now, it has actually dropped to about 86 million full-fare traditional customers, if you account for cable homes with cheaper streaming subscriptions.

A person points a remote control at a TV.

More people are cutting the cord with cable. Image source: Getty Images.

How bad is it?

In Q2 there were signs that cord-cutting might be slowing. The latest numbers suggest that customer patterns just shifted slightly. Leichtman Research Group (LRG) President Bruce Leichtman expressed optimism at the end of Q2:

The top pay-TV providers lost about 415,000 subscribers in 2Q 2018. This marked the fewest net losses in the traditionally weak second quarter since 2014. The two publicly reporting internet-delivered pay-TV services now have over 4 million subscribers. This newer segment of the industry has helped to mitigate overall pay-TV losses, while also contributing to a share shift from traditional services.

That was a hopeful read of the numbers, but the dismal Q3 results -- from numbers provided by MoffettNathanson -- make it clear that things have actually gotten worse. LRG has also discovered another trend: The total number of homes in the United States that subscribe to some form of pay-TV service has dropped to 78%. That's down from 87% in 2008 and 86% in 2013.

The most disturbing part of the trend LRG uncovered may be how it breaks down along age lines. The company wrote: "In TV households, 70% of adults ages 18-44, and 84% of ages 45+ subscribe to a pay-TV service. Comparatively, in 2013, 83% of adults ages 18-44 and 88% of ages 45+ had a pay-TV service."

It's not clear yet if younger customers may eventually become pay-TV customers as they get older, get married, have kids, and increase their income. The current trend, however, clearly suggests that younger consumers are more willing to go without a pay-TV service.

"The penetration of pay TV among younger individuals and related groups, including renters, singles, and movers, has declined at a faster pace in recent years, expanding demographic divides in pay TV," Leichtman said.

Is this the end of cable?

The major cable and satellite companies aren't going anywhere -- at least for many years. So far, any cord-cutting has been offset by gains in broadband. Eventually, that market will become saturated, and overall revenue will drop as more customers leave cable.

Before any major cable company fails, it's more likely that niche cable channels will go out of business as they lose the pennies per customer they are paid by the cable companies. Fewer viewers will also mean lower ad rates, and that could choke some smaller-audience players out of business or push them to adopt a subscription or streaming model.

Cable's death will be a slow one that drags out over decades, not years, but its suffering will be consistent. There's less need for cable or satellite in the current marketplace due to the prevalence of streaming services and free online options. That's going to continue, and alternatives to traditional pay TV are only going to increase.

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