The cord-cutting movement is as strong as it ever was. During the third quarter, another 650,000 U.S. households canceled their cable television service, according to data from Leichtman Research Group. That brings the year-to-date attrition tally to a little more than 3.7 million. The remaining cable companies, including Comcast (CMCSA -0.25%) and Charter Communications (CHTR -1.63%), now serve an estimated 77 million paying customers, all told.

Given the trajectory of the industry's slow-and-steady implosion, there's no reason to think the downtrend will start to level off any time soon. However, there was one surprising bright spot buried in that data that all investors should be aware of.

A pair of scissors cutting a cable cord.

Image source: Getty Images.

Consumers are (still) cutting the cord

Assuming the current quarter looks anything like the past three, the nation's cable TV providers are on pace to shed around 5 million customers for all of 2021. That would be on par with the annual losses they have regularly suffered for years now. As the graph below illustrates, cord-cutting has been a surprisingly steady phenomenon from one year to the next, and even from one quarter to the next.

The U.S. cable industry's customer base continues to shrink from its 2007 peak.

Data source: Cable TV companies' quarterly updates, and estimates from Leichtman Research Group and MoffettNathanson. Chart by author.

The trend, however, is both worse and better than it would appear at first glance.

While the customer attrition pace is fairly consistent, it's also entirely limited to conventional cable service providers. Charter, Comcast, and their traditional cable peers shed a total of 700,000 customers during the third quarter of this year, while satellite-TV providers such DirecTV -- recently spun off by AT&T's (T 0.58%) -- and Dish Network (DISH) along with streaming cable provider Verizon FiOS lost 633,000 customers total. But those customer losses were offset by the 680,000 paying customers Leichtman Research says were gained by platforms like Disney's (DIS -0.12%) Hulu+Live, fuboTV (FUBO -0.75%), and Dish's SlingTV in Q3.

Their growth extends what has also turned into a full-blown trend.

The rise of the vMVPD

They're called virtual multichannel video programming distributors, or vMVPDs for short. From a TV viewer's standpoint, they work just like conventional cable service delivered via coaxial cable or satellite, but the video is streamed digitally via a broadband connection.

And they've officially turned disruptive, leveraging prices that are usually cheaper than traditional cable subscriptions, and made even lower because they don't include the local add-on fees and taxes that tend to bloat cable bills. According to Market research outfit eMarketer, 73% of the households that canceled cable during 2021's second quarter said that one of their reasons for doing so was because the service had become too expensive.

Except about half the people that have "cut the cable cord" over the course of the past couple of years haven't really done that. They've simply migrated to an alternative form of cable service. Based on MoffettNathanson's Q3 estimate of 4 million YouTube TV subscribers in addition to company-confirmed virtual cable headcounts of SlingTV, fuboTV, and Hulu+Live, U.S.-based vMVPDs now serve around 11.5 million customers. That's up from close to zero as recently as 2017, when Hulu added live cable content to its on-demand menu.

The United States' virtual cable television industry is growing almost as quickly as the linear cable business is shrinking.

Data sources: Cable TV companies' quarterly updates, and estimates from Leichtman Research Group and MoffettNathanson. Chart by author.

Too big to ignore

It's not necessarily the end of the world for all cable companies. Comcast's Xfinity service might be losing ground, but as the parent to NBC, Universal, and relatively new streaming service Peacock, it has other profit centers to leverage. Likewise, Dish owns SlingTV, so it can partially offset its satellite TV losses with streaming TV gains.

For less diversified cable companies like Charter and Altice (ATUS 7.62%), though, this shift poses more serious problems.

While the U.S. cable television industry still boasts around 77 million households as customers, eMarketer estimates that figure will be close to 63 million by the end of 2024. Looking at the trend from the other direction, as awareness of the alternative continues to grow, Parks Associates estimates the country's vMVPD industry will be 23 million households strong by 2024 -- at which point Park suspects that the U.S. could be down to only about 53 million conventional cable subscribers. That trend has the potential to deliver a lift to Dish and Alphabet (GOOG 1.06%) (GOOGL 1.08%), which owns YouTube TV. It could prove a particularly bullish tailwind, however, for a dedicated vMVPD service like fuboTV.

At the very least, investors have to recognize that these two trends are too big and too game-changing to simply ignore.