The Explosion of Cord Cutting: 22 Million Expected to Abandon Cable

Cable and Pay TV are taking serious hits in lost revenues because people of all demographics groups are cutting the cord. By the end of the year, more than 22 million customers will abandon their pay TV services, an increase of more than 30 percent from a year ago. While the younger audiences are using smartphones to watch their favorite shows, older adults are keeping their connections — and that number is expected to grow. The problem for the cable companies is that they are having to deal with a net loss in subscriptions, and with the population trending towards a younger audience there will not be an over-55 demographic to keep them afloat.

Beyond the youth factor, cable TV companies have been offering what is known as “skinny” packages. Basically, these are subscriber packages that have fewer channels, and are popular because they cost less. So while the cord has not been completely cut, the diameter of the cable has shrunk. Early in the football season, customers are choosing to go without, saying that the extra $20 a month to have access to the extra games is just not worth it.

The numbers from the hardest hit companies tell the story. AT&T tried to lure customers by packaging free HBO with a DirecTV subscription but still lost 156,000 subscribers. Dish satellite lost 196,000 subscribers. Dish marketers maintained there were two factors behind the rush to cut the cord: customers overpaying for cable service with packages that have channels most consumers will not watch, and the notoriously bas customer service they receive.

Netflix, Hulu, and PS Vue are fast becoming the preferred choice for regular TV viewers. If ESPN is an example, a couple of years ago they laid off more than 200 employees because of lost revenue from cable cutters. Another impact: TV advertising revenue. The expected growth rate of TV advertising is projected to be a paltry 0.5 percent for 2017.

Much of this was predicted years ago, with the growth of technology and the increasing data speeds owners of smartphones have access to. The price of those data plans have dropped, thanks to competition between the big 4 consumer telecommunication companies, driving smartphone owners to watch their programs on their devices. Internet companies such as Netflix seized the opportunity, and are positioning themselves to be a major player, broadcasting original TV series and an array of old and new programming.

The cord cutting event will reach a frantic pace as 5G data communication is perhaps a year away from being offered. The new bandwidth is supposed to be especially good for video transmission and reception. The new iPhone X appears to have been designed with 5G in mind, and users who have no problem spending $1000 for 256 gigs of memory and complete the experience with a 5G data connection.

Should cable TV go the way of the rotary phone in 5 years, it will dramatically change the way advertisers sell their stuff and even the way shows are broadcast. Whether or not cable providers realize it is futile to stop the momentum and create a Plan B, their fate already seems to be decided.

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