Netflix, Hulu Rising Popularity Hastens Pay TV Cord Cutting [STUDY]

Updated on

Netflix and other Internet services are now more likely to push users to cut their cable and satellite TV subscriptions, claims a study released Wednesday. Though the study found that the number of users expected to cut their cable in the next 12 months is still very small, the percentage is steadily rising, says a report from the SF Chronicle.

Encouraging numbers for Netflix

Cord cutting is a word describing viewers who have reduced or cancelled their traditional pay TV subscriptions. The Magid study considered 2400 U.S. consumers for the study, of which 3.7% are “extremely likely” to cut the cord versus 1.9% in 2011. The numbers are relatively small, but what’s encouraging for Netflix and similar services is 7.1% of the viewers ages 25-34 are ‘extremely likely’ to be cord cutters.

“Though this is a small number of consumers, it still adds up to big bucks for major pay TV companies,” Mike Vorhaus, president of Frank N. Magid Associates, the firm that conducted the research, said. The most troubling finding for the pay TV industry is that the viewers between 25-34 are more likely to cancel their TV plans. Such users generally belong to a group who are about to get married, buy a home and raise kinds, the firm said.

The study claims that a constant rise in the cord cutting “is not some sort of ‘over the cliff’ emergency, but rather a ‘drip-drip-drip’ problem for the pay TV industry,” said Vorhaus.

Cost, not the factor

According to the study, 20% of users said they never subscribed to a TV service while 23% said they last subscribed to such a service more than five years ago. Furthermore, 21% said they ceased their pay-TV subscription within the past year.

It’s not costs that are forcing cord cutting, as only 30% said that pay TV is expensive, compared to 40% last year. Instead, 77% of cord cutters said that they are more satisfied with streaming services such as Netflix and Hulu.

The findings of the study become more threatening for the pay TV industry if we consider the rising popularity of streaming services like Netflix and Hulu. More similar services are expected to debut later this year, including Sling TV and HBO Now. Earlier this week, CBS made its CBS All Access TV streaming service, costing $5.99-per-month, available on Google’s Android TV platform. There is also speculation that the firm has similar plans for Apple TV.

Though pay TV still holds the majority of TV viewers, the new viewer growth rate has almost flattened.

Leave a Comment

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!