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Millennials Driving The Trend

Cord-cutting is a reality in all markets, and viewers are increasingly turning to OTT services. Broadcasters and pay-TV providers all recognize that viewers now expect to be able to watch their favorite content on the device of their choice, at home or on the move.

Opting out of cable and satellite TV is becoming increasingly popular in the face of declining traditional TV and burgeoning video streaming alternatives such as Netflix and YouTube, more so by the millennials. Cord-cutting has been hailed as a consumer-friendly alternative to paying for expensive subscriptions and is changing the way that people consume media. Rather than flipping through channels on the cable box in hopes of uncovering a good watch, people are receiving personalized feeds of video content that are ad-free. Every day, cord-cutting is becoming a relevant decision to households that have access to the internet and video streaming services.

The trend of people cutting their home internet connections in favor of wireless online connectivity is accelerating. The trend marks the third wave of cord-cutting over the past few decades. In the first wave of cord-cutting, people dropped their landline phone connections, starting around 2003, in favor of more convenient wireless connections. The second phase, which helped popularize the phrase cord-cutting, started around 2010 as the price of cable television subscriptions started to seem excessive after the big recession. Internet video viewing has skyrocketed, as viewers increasingly moved to everything from Netflix to short videos on Google’s YouTube to cable-like packages of channels distributed over the internet. Fueling the trend is the massive shift to watching video on smartphones and tablets. The latest wave of cutting home internet could thwart the cable industry’s response to cord-cutting of cable TV subscriptions. Analysts expected that most customers who fled cable TV would still buy home internet service from cable companies.

The decline of linear TV
There is no question that cable TV and satellite subscriptions are down and will continue to decline. The decline will subside in 2019 with two shifts. First, consumers will come to realize cord-cutting costs more as they pay for quality programming. Second, cable and satellite providers will realize more revenue per customer from addressable advertising than from subscription fees.

However, as the revenue streams of the entertainment industry changes and the balance of paid versus advertising-supported video entertainment evolves, people will continue to watch an enormous amount of content on their various small- and medium-sized flat screens. The amount of time spent watching and interacting with video entertainment will remain one of the top leisure activities.

The rate of consumers dropping their cable and satellite TV packages hit the highest level ever in the last 3 months of 2018. And for the first time in a few years, the losses were not more than offset by people signing up for internet TV subscriptions. To counteract the trend, many traditional networks and cable companies are offering their viewers the option to binge-watch their favorite series and movies with the same convenience as the top streamers. For example, cable giants HBO and Showtime have HBO GO and Showtime respectively. In addition, cable companies are embracing on-demand video providers once considered a threat by offering customers access to Netflix, YouTube, and Sling TV. To remain relevant, partnerships with streaming services and digital video startups are paramount in the effort to hold onto customers and revenue.

Though cord-cutting and cord-shaving remain a challenge for traditional pay-TV providers, the vast majority of consumers are still not ready to give up on what they consider proven and deeply established sources of entertainment via their cable, satellite or telco TV service(s) and have no plans to drop what they are used to.

If there is one bright spot to all this for the cable and satellite providers, it is that there is one thing that binds cord cutters and non-cord cutters alike, the need for expanded, ever-increasing high-speed internet. Luckily for these companies, they are also the main ones that provide this high-speed internet service. While a continued drop in revenue for pay-TV service is likely, more and more consumers will demand increasingly high-speed internet service that will allow them to stream HD video to any device, and multiple devices, in their home and on the road. In fact, by continuing to build out their high-speed internet infrastructure, the cable and satellite giants may be able to simply shift the focus of their revenue generation even more from pay-TV to high-speed internet, rather than having that revenue disappear altogether. So, while the behaviors of traditional pay-TV subscribers are changing, and as millennials are aging into the top purchasing demographic, it does not need to spell the complete and utter end to cable and satellite companies across the country.

Trends to look forward to in 2019
For cord-cutters, 2019 is the year in which everything changes. There will be several new streaming services to compete with the likes of Netflix, major alterations to the live TV services that are aiming to replace cable, new ways to sift through an ever-larger array of streaming TV options, and some interesting new streaming devices. When 2019 is over, consumers’ options for cutting the cable TV cord will look a lot different than they do today.

The next 5 years will see a rise in cord cutters with 17 percent growth in OTT-only subscribers, yet OTT-plus, including those who are not ready to cut the cord entirely, will grow 10 percent. OTT-plus, which includes subscribers of OTT and some combination of other sources of entertainment like cable, premium cable, broadcast, or satellite, will continue to grow in market share. Despite subscriber and market share declines, most customers are not ready to cut the cord entirely: linear TV options will still drive nearly 41 percent of the market by 2024. OTT customers are not ready to cut the cord until they have access to live content from OTT providers, such as sports, news, and other live programming. If OTT providers integrate live content, one in four people will cut the cord by 2024.

New on-demand streaming services
Standalone streaming services such as Netflix and Amazon Prime have not seen much new competition over the past few years, but that will change in 2019 with the arrival of several important new services. A flood of new live TV streaming services is trying to cash in on cord-cutting. First up will be Apple, whose long-awaited streaming service is likely to launch in the early part of 2019. And there probably will be a need for an Apple device to watch.

Later this year, Disney will launch its own service, called Disney+.

New home internet options
2019 will likely be the year new internet options come into their own. From services like fiber to new internet options like 5G and fixed wireless. 5G will have a huge impact on telecommunications companies. It is likely to launch a new cord-cutting epidemic as consumers cut their home broadband. Increasingly, new internet providers are moving in to take on the giant cable and phone companies. Now, with wireless and fiber internet expanding, there will be new internet options for cord cutters slowly popping up around the country.

Millennials see no need for cable
The trend toward cutting the cord has escalated every year recently, with millennials’ behavior being the driving reason for the shift. Since millennials are the ones setting up new households and they have a proclivity to streaming sites, it is not surprising that younger households are deciding to cut the cord with their traditional pay-TV services and are instead opting to rely on the internet for their entertainment needs. There is also a growing number of cord-nevers, those that have decided to skip pay-TV altogether. The top reason for canceling their pay-TV subscriptions is that they do not see a need for it anymore. That is because this age group, especially, gets enough of what it wants from streaming services. The three leading streaming services have continued to pump money into the original content they produce, giving consumers a viable alternative to traditional cable or satellite TV. In addition, some cable companies are even offering streaming services such as HBO Now, Showtime OTT, and CBS All Access, making a subscription to traditional cable or satellite TV obsolete to some. In fact, because most millennials are going to subscribe to streaming services, they are likely to see pay-TV services as a luxury add-on, not the other way around.

Cord-cutting mergers
There will be companies trying to buy up other streaming services. Disney is buying a majority of Hulu, but it likely would not stop there. There will be other companies trying to buy up smaller streaming services in an effort to get a bigger cut of cord-cutting.

Live TV changes
As for live TV streaming services, 2019 may be a year of reckoning. These services are reportedly unprofitable in their current iterations, and there have already been some belt-tightening in the form of price hikes and fewer device giveaways. More sweeping changes could come this year as companies try to distinguish their offerings make more money, and slow the overall collapse in linear TV viewership.

Sports are going to be a major catalyst for live streaming in general, and streaming is a much-needed tonic for sports leagues that have seen a decline in ratings and ad revenues. Streaming live games helps leagues gain access to younger audiences that have cut the cord, or were never attached to the cord in the first place, and it helps mitigate the ongoing decline in viewership brought about by cord-cutting.

Way forward
As cord-cutters grow in number, canceling their traditional cable and satellite services, the outlook for traditional TV is going from bad to worse. Talk of cord-cutting versus traditional pay-TV is not a new topic of conversation; there are loyalists to both sides. Will cable wake up? With so many new and emerging ways to cut the cord, and so many people ditching traditional TV, maybe 2019 will also be the year in which cable presents a credible response. Already, Comcast has been letting customers use Roku devices and Samsung TVs in place of cable boxes as part of a public beta. The big question is whether cable companies will become more aggressive in marketing these offerings, and whether cable packages themselves will begin to evolve. Cable companies traditionally had limited power to slice and dice their offerings, due to contractual obligations with TV networks, but perhaps sinking subscriber numbers will compel both sides to take a different approach.

OTT providers are outperforming linear rivals, traditional broadcast, and cable providers with fixed programming schedules, in certain categories. These include intuitive interfaces; high-quality, exclusive content; and a pricing model that mirrors the industry’s successful on-demand, ad-free music subscription services like Apple Music and Spotify. New cord-cutting products and services which were likely never even dreamed of may be arriving in 2019. One thing is clear, in the ever-changing landscape of entertainment nothing is ever set in stone. Though things look bleak for linear TV at this point in time, there is no telling what the future will bring. With countless TV shows to choose from, the power is truly in the hands of viewers.

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