The struggle that U.S. pay-TV service providers have been having with their subscriber numbers has been well documented --and debated -- by industry wags who point to cord cutting, cord nevers, a struggling economy or other factors as reasons for the modest decline.
But declining pay-TV penetration rates, even as the number of new household formation increases, may be a more urgent warning for the industry.
Despite some erosion of subscriber numbers in the past two years, Pay-TV subscriber numbers have been relatively steady at 100 million or so for a couple of years. But the number of households in the U.S. has been increasing, from 113.3 million in 2005 to 117.5 in 2010 and 122.5 in 2013, according to the U.S. Census Bureau.
“The number of pay-TV subscribers in the US remains about as high as it has ever been, but penetration of pay-TV services in consumers’ homes has declined over the past few years as subscriber growth has leveled-off, while occupied housing in the U.S. has increased,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group. “Housing growth has been exclusively among renters, who tend to be more challenging for the pay-TV industry than home owners because of their comparatively lower income, younger age, and greater likelihood to move."
In 2013, roughly 35% of U.S. households were renter occupied, up from 31% in 2004, according to Harvard University’s Joint Center for Housing Studies. Rental rates have risen in the 2000s at more than double the rates of recent decades; and the increases of more than 500,000 new renter households annually are expected to continue.
LRG’s research, Cable, DBS & Telcos: Competing for Customers 2014, which is its 12th annual look at the industry, also found that America's penchant for moving is having a larger impact than in years past. More than one-fifth (22%) of those pay-TV subscribers who moved in the past year do not currently subscribe to a pay-TV service – a higher level than in previous years.
And, LRG said, pay-TV’s declining penetration is being compounded by the growth of alternative TV platforms like Netflix, Hulu Plus, Amazon and others available via the Internet. LRG found that 11% of non-subscribers cite the Internet or Netflix as the main reason for not currently subscribing to a pay-TV service, nearly 4X the number who cited those reasons in 2009 (3%).
Among LRG’s other finding:
- Among TV households that do not currently subscribe to a pay-TV service, 6% plan to subscribe to a pay-TV service in the next six months – including 20% of those who subscribed in the past year, 2% who subscribed over one year ago, and 4% who never subscribed. Overall, 35% of non-subscribers never subscribed to a pay-TV service.
- Nationwide, 22% of TV households with annual incomes <$50,000 are non-subscribers – compared to 13% with incomes >$50,000.
- Mean reported monthly spending on pay-TV service is $89.78 – an increase of 36% since 2009.
- 12% of cable TV subscribers, 12% of telco TV subscribers, and 11% of satellite TV subscribers are likely to switch from their current provider in the next six months.
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