While the idea that people will drop pricey cable subscriptions in favor of cheaper streaming services seems logical, in reality that trend has yet to take hold.
In the past two years the top pay television providers have only lost about 0.2% of their customers, according to a new report from Leichtman Research Group.
That's a trickle, not a flood, and it shows that while cord cutting may happen at some point, it's not happening yet on a widespread basis. Cable costs a lot more than Netflix (NASDAQ:NFLX), Hulu Plus, or Amazon (NASDAQ:AMZN) Prime Instant Video, but clearly consumers still see value in having access to a complete package of channels through one service.
Exactly how many people left cable
LRG found that the 13 largest pay-TV providers in the US -- representing about 95% of the market -- lost about 125,000 net video subscribers in 2014. That's a similar number to to 2013, when the same providers lost about 95,000 subscribers.
The top 13 pay-TV providers account for 95.2 million subscribers. A little more than half of that -- 49.3 million comes from the top nine cable companies. DirectTV (NASDAQ:DTV) and DISH Network (NASDAQ:DISH) have 34.3 million subscribers, while the two top telephone companies, AT&T (NYSE:T) and Verizon (NYSE:VZ), account for 11.6 million subscribers.
|Pay-TV Providers||Subscribers at
End of 2Q 2014
|Net Adds in
|Other Major Private Cable Companies**||6,450,000||(225,000)|
|Total Top Cable||49,278,617||(1,192,777)|
|Satellite TV Companies (DBS)|
|Total Top Phone||11,592,000||1,047,000|
|Total Top Pay-TV Providers||95,200,617||(125,777)|
"2014 marked the second consecutive year for pay-TV industry net losses, but the losses remained modest again this year," said Bruce Leichtman, president and principal analyst for LRG. "Despite a relatively saturated market, and increasing alternatives for consumers to watch video, the top pay-TV providers have only lost about 0.2% of all subscribers over the past two years."
- The lower-income households that he believes comprise the biggest part of the cord-cutting audience are getting priced out of pay TV by rising subscription rates.
- The digital alternatives from Netflix to Hulu that are meant to be supplements to cable end up being substitutes.
Moffett may have changed his mind but not all analysts agree that cord cutting is a threat to pay TV as it currently exists. Analyst Jonathan Chaplin, from New Street Research does not buy into the idea that cord cutters will cause major problems for pay television companies.
"In our view, concerns over cord cutting and regulation are overblown and cable assets are among the most compelling opportunities we see globally," Chaplin wrote in an email, FierceWireless reported.
Daniel Kline has no position in any stocks mentioned. He has not cut the cord, but he has tripped over it on occasion. The Motley Fool recommends Amazon.com, Netflix, and Verizon Communications. The Motley Fool owns shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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