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Report: 30% of Pay-TV Households at Risk to Cheaper Online Options

18 Apr, 2011 By: Erik Gruenwedel

Nearly one in three households receiving subscription-based pay-television is at risk of terminating service for lower-cost Internet video alternatives such Netflix, Hulu and video game portals, among others, according to a new report.

Scottsdale, Ariz.-based In-Stat said that while the base of domestic pay-TV subscribers (cable and satellite) remained flat in 2010, gaining 148,000 subs (0.15% annual growth rate), consumer trends indicate increased willingness to access video content through alternative means.

In-Stat analyst Keith Nissen said with the exception of Netflix, use of Web-based video content sources is not expanding, as consumers migrate toward online portals to view specific movie and TV content.

Specifically, the report found that cable operators lost 2.5 million subscribers last year, with satellite and telco operators making up the difference. Neither age nor household income appeared to impact so-called pay TV video “cord cutting.” In fact, more households added premium channels in 2010 than dropped them. Noteworthy is the fact that cable sports is valued significantly less than on-demand access to TV content or premium TV channels; more sports will not protect against cord cutting.

“A substantial portion of pay-TV subscribers exhibit similar characteristics to video cord-cutting households,” Nissen said. “It is important to track these ‘at risk’ subscribers, rather than the pay-TV subscriber base as a whole. In general, our new data confirms that adoption of online video is growing.”

He said the frequency of online video consumption would only increase with the advent of more popular “must-see” content.

Examples of such content could include original programming such Netflix's planned “House of Cards” series starring Kevin Spacey, or access to all of Paramount Pictures theatrical releases in Canada.


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