Cord-cutting accelerated dramatically in 2017. We look at new data that shows price is the reason. It also shows that vMVPDs, particularly YouTube TV, are enabling cord-cutting and benefiting from it.
Chapter 1: Why cord-cutting is accelerating (1:40)
I estimated last week that cable, satellite, and telcoTV lost 3.5 million subscribers in 2017. Kagan and Leichtman Research weighed in this week with estimates between 3.2 and 3.7 million. TiVo asked the people in its Q4 2017 survey that had cut the cord why they did so. The most popular answer by far was that pay TV was too expensive. The next most popular answer was that people were using SVOD service instead, but it was cited by under half as many as said pay TV was too expensive.
One of the reasons people are valuing their pay TV less is because they are spending less time with them. The TiVo data shows that 93% of people that subscribe to SVOD services say they use the service every day, 3% higher than two years ago. As well, the number of people that say they use their service for less than 1 hour a month decreased 10%, to 12%. Meanwhile, those using their service for 2 hours a day or more increased dramatically. A third say they watch their SVOD services for more than 3 hours a day, and almost a half watch from 1 to 3 hours per day.
Chapter 2: YouTube TV is now a leading vMVPD (7:10)
TiVo added YouTube TV to the quarterly survey for the first time in Q4 2017. An amazing 9% say they use the service. The next nearest service, DirectTV Now, has less than half of YouTube TV’s total, and Sling TV has less than a third. We should perhaps treat the YouTube TV number cautiously. It is possible some survey respondents confused YouTube TV with YouTube on TV. That said, even if YouTube TV has just half the number of users as TiVo indicates, it is still the new category leader.
I expect cord-cutting to accelerate even more in 2018, perhaps reaching 5 million. I see two reasons for this:
- Pay TV is no longer the primary home entertainment service in many connected homes
- vMVPDs are continuing to invest heavily in their service
This week Sling TV released a much-improved experience on Roku. FuboTV is adding new local channels almost every day.
Chapter 3: The importance of local TV in vMVPDs (15:30)
Will thinks that the inclusion of the local channels in the vMVPD package is very important. For that reason, he thinks Sling TV, which does not include them, has a big problem. He sees FuboTV as emulating YouTube TV’s approach, which has 80 or more markets where it can provide the four major broadcasters. He admits he has been skeptical of the vMVPD model because of the missing channels. However, he is beginning to shift his opinion because of the shift in consumer behavior away from pay TV.
I disagree that Sling TV’s approach is flawed. For consumers that are comfortable or able to use an antenna, it is the best deal. The AirTV android TV-based streaming media player works very well, Sling is trialing recording local channels to attached USB storage and is improving the interface. Its entry-level package remains at a very attractive $20-a-month.