Cutting the Cable: Pay TV Subscribers Turn to Internet

by Mark Friedman  on Monday, Jul. 16, 2012 12:00 am  

Between 2008 and 2011, an estimated 2.65 million people, or 2.6 percent of U.S. pay TV subscribers, cut their TV subscriptions to rely solely on online content or watch broadcast television with the use of an antenna. (Photo by Shutterstock)

Courtney Baum of Bryant was tired of paying $89 a month for television shows she received through DirectTV.

So at the beginning of 2011, the 25-year-old canceled her satellite TV subscription and bought a Hulu Plus plan over the Internet for $7.99 a month that allowed her to watch most of the current television shows.

Baum already had a subscription to streaming Netflix for $7.99 a month that also gave her options to stream movies and television shows into her home through her Microsoft Xbox 360.

A year and a half later, Baum doesn't regret the decision, even though some TV shows aren't available, such as the ones involving the Kardashian clan or sporting events.

"I'm paying $20 [a month] instead of $90," she said.

Baum is part of a growing population who are canceling their cable or satellite TV service and opting to watch television shows online for free or through paid services such as Netflix.

Between 2008 and 2011, an estimated 2.65 million people, or 2.6 percent of U.S. pay TV subscribers, cut their TV subscriptions to rely solely on online content or watch broadcast television with the use of an antenna, according to an April report from the Convergence Consulting Group Ltd. of Toronto, which studies the trend. Of that number, 1.05 million did it in 2011, and it is projected that by the end of this year the number of cord cutters will reach 3.58 million, the study said.

The trend is noticeable in Arkansas too. Although the major providers don't release subscriber numbers for Arkansas, cable providers in Paragould and Conway, which are both owned by their cities and make their numbers available under the Freedom of Information Act, reported drops in cable subscribers since 2009.

While the number of cable cutters is relatively small compared with the approximately 100 million who pay for television through cable, satellite or services such as AT&T's U-verse, pay TV providers have been offering a variety of services to keep their customers while allowing them to watch their programs over the Internet. (See sidebar Pay TV Providers Expanding Beyond TV)

Still another troubling trend for pay TV providers is looming: About 5 percent of pay subscribers said they have downgraded their pay TV package and are watching more online videos, according to Brett Sappington, director of research for Parks Associates in Dallas, a market research and consulting firm.

And pay TV providers are finding more threats to their business as Internet providers are trying to capture customers who are interested in leaving their cable or satellite TV service.   

In March, Windstream Corp. of Little Rock unveiled its Merge product, a high-speed Internet and streaming entertainment service, a move that was sparked by the trend of people cutting the cable, said David Redmond, Windstream's vice president of consumer services.

 

 

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