Cord cutting: the act of cancelling subscription television services, dropping expensive channel packages, or reducing the hours spent watching pay television. This is an epidemic that is growing at an astonishing rate thanks to the increase in Internet television services such as Amazon Prime, Hulu, Netflix, and Sling TV.
Nearly five million homes are expected to cut the cord this year, which is an 11% increase from the year prior. In addition to the increase of cord cutters, there is also a steady increase of cord nevers, which is a population of people that have never subscribed to pay TV services. According to Media Post, the percentage of pay TV viewers is just above 75%, and is predicted to continue to rise. This leaves us wondering, is this the beginning of the end for TV? And, what does this mean for TV advertising?
A recent article from AdWeek suggests that these headlines are exaggerated. Yes, people are cutting cords, but not as fast as some analysts think—2-2.5% of users each year are leaving pay TV—but not the way people think. Just because users are turning to streaming services like Netflix, doesn’t mean they are fully getting rid of pay TV subscriptions. According to a survey performed by the blog Cut Cable Today, more than two-thirds of Netflix’s U.S. customers still have pay TV services in addition to the streaming platform. Bruce Leichtman, president and principal analyst of Leichtman Research Group, estimates that 100 million U.S. households still subscribe to pay TV, which is 86% of all U.S households using television (HUT).
Though this may not be as drastic as headlines are indicating, this trend is not being ignored by agencies. “It’s top of mind for marketers,” said Colleen Leddy of Droga5. “But we’re not going to shift to digital video unless we have the numbers telling us that’s where our audience is.” Agencies do risk the chance of falling behind if they keep the “stick with what works” mentality. It is important to keep this cord-cutting trend on the peripheral and start looking at advertising holistically so it takes advantage of all opportunities.