The gradual consumer shift away from traditional linear video services toward streaming will have a dramatic effect on U.S. pay TV revenues by 2025.
According to new forecast from Kagan, cord cutting is expected to carve approximately $33.6 billion out of U.S. pay TV revenues over the next five years. The research company predicted that U.S. pay TV providers would take in about $91.1 billion in revenues this year but that figure will dip to $64.7 billion by 2025.
That estimated 2025 revenue figure would nearly cut in half the roughly $117 billion in revenue that Kagan estimated operators reported in 2016.
Changing viewing patterns, only slightly moderated by rising average revenue per unit, are forecast to depress sales excluding advertising by 45% from the estimated 2016 annual peak of more than $116.9 billion,” wrote Ian Olgeirson, research director at Kagan, in a research note. He added that satellite operators like Dish Network and DirecTV and telco providers like Verizon will see the worst of it.
“While all three major platforms are feeling the impact from the shift, the magnitude of the losses are expected to hit more acutely for DBS and telco revenue subtotals amid waning commitments by major players and relative stability from the large cable providers,” he wrote.
According to recent Parks Associates’ research, more than one-third of U.S. broadband households are cord-cutters who previously subscribed to traditional pay TV. That comes out to more than 38 million households.
Paul Erickson, senior analyst at Parks Associates, said that within that total fewer than one in 10 are cord-nevers who never subscribed to traditional TV.
“Though similar in their aversion to traditional pay-TV, these segments are very different. Cord-nevers are younger, less affluent, much less likely to have children in the home, and slower to adopt new technology. Cord-cutters are more active in consuming all types of OTT content and currently spend nearly twice as much monthly on OTT services than cord-nevers,” he said.