Subscription cancellations will cost the pay-TV industry billions in lost subscription revenue, as cancellations mount.
The consulting firm cg42 projects Over 5 Million U.S. Consumers Will Cut the Cord in 2018.
Cg42 estimates a total of 5.4 million U.S. consumers will cut the cord in 2018, resulting in a $5.5 billion loss in revenue. This compares to 4.8 million in 2017 and 3.8 million in 2016.
“As the process of finding alternative paths to content gets easier and easier, people are acting on the frustrations they have with traditional providers and leaving,” the study’s lead author and cg42 managing partner Stephen Beck told MarketWatch.
Cg42 asked cord-cutting respondents and respondents who had never used a subscription pay-TV service what streaming services they had used in the past three months. Of paid streaming services, Netflix NFLX came out on top, followed by Amazon Prime AMZN and Hulu Plus.
The survey’s publication came hours after Netflix announced it had missed subscriber expectations fore the second quarter. The stock was down 13% Tuesday morning, but analysts stood by the company, saying the pullback was a buying opportunity.
Netflix Leads the Way
Netflix Buying Opportunity?
Does missing growth expectations constitute a buying opportunity? Heck, I have no idea if Netflix will even survive.
Netflix is bleeding cash badly with no bottom of the hole in sight.
Hulu?
I confess. I never heard of Hulu.
Yet, I figured my wife Liz had heard of it. Her millennial daughter, my stepdaughter, is the clue. Sure enough, she uses Hulu.
We seldom watch TV. “Almost never” is a better description than “seldom”.
Not counting listening to oldies stations on TV, at home I average a couple hours a month at most.
I did watch an hour of the world cup soccer final. Before that, I cannot remember. I can go months without watching TV at home. Counting TV viewing while sitting at a bar after golf or when out to dinner, add another hour per week of half-paying attention watching.
Hulu Share by Age Group
The above charts from Statista.
Given my viewing habits, I would have little reason to know about Hulu. It is still a private company.
Seeking Alpha writer “Showbiz Insider” purports Improving Hulu Will Cause Disney’s Stock Price To Spike.
Here is his rationale: “Once Disney acquires Fox, it will have controlling interest in Hulu and the ability to revitalize the aging streaming service.”
None of these models excite me but Disney at least has Free Cash Flow.
Disney Free Cash Flow
If you make money in one area, you can paper over losses in another. Netflix has lost money every quarter since inception.
Netflix vs Hulu
The Well Kept Wallet asks Which is Better Hulu or Netflix?
The answer depends on your needs. Hulu is US and Japan, at least for now. Netflix is global.
According to their site, “Hulu is the only streaming service that offers a library of the current season hit TV shows, films, full seasons of acclaimed series, premium original programming and clips to subscribers.”
Netflix differs from Hulu in that whereas Hulu offers popular show episodes often within 24 hours of when they air, Netflix focuses more on quantity. You won’t find prime time TV series episodes available nearly as quickly on Netflix as you will on Hulu.
However, Netflix shares thousands of movie and TV offerings – a much larger amount of content than Hulu offers.
Can Netflix Survive?
In response to Can Netflix Survive? someone suggested Netflix can dramatically hike prices.
What about the competition?
If Hulu or other competitors start a price war, Netflix won’t be able to hike rates willy-nilly without losing customers. And what if Hulu goes global?
Mike “Mish” Shedlock
I doubt that NFLX can just “hike subscription rates”. It seems more likely that it will be forced to lower them once Disney enters the streaming segment in earnest (NFLX already canceled a number of new seasons for a few of the Marvel shows it licensed from DIS – a strong hint that DIS will take these properties back shortly). It remains to be seen though whether NFLX can convince the markets of its viability once the asset bubble deflates. AMZN succeeded in this endeavor when the post 2000 bear market decimated the internet sector. It simply curtailed investment spending for a few quarters and reported positive earnings. That was enough to bolster confidence to the extent required to enable it to return to debt-funded growth.
Netflix is following the Malone model: Leverage eyeball revenue for content. Then dump the eyeballs off on unsuspecting rubes. Malone did it to AT&T by dumping TCI and keeping Liberty Media. Maybe Netflix will sell out the distribution business to Verizon, they seem willing to buy junk like Yahoo.
You may, at least for the time being, be in a minority….
The hope is that, if presented with high enough production values, handsome enough actors, and pretty enough actresses being undressed beyond what network TV convention allowed them to be, the drones may be captivated enough to not mind that what they are watching is simply party propaganda in pretty packaging (or even prettier lack thereof….)
I wouldn’t touch Netflix for 10 cents per month. If I want leftist propaganda, I can get it free from the horse’s mouth.
We recently cancelled Netflix cable, not because of cost, but because we do not want to support certain people they recently hired. A lot of other people also cancelled Netflix for that reason.
Grant Mish some terminology leeway since he’s not a subscriber to any distribution method. The gist of the post is cable TV cord cutting growth and the business model of the streaming services.
Someone will pick up the NetFlix owned content for Ch. 11 pennies some day. They have a horrendous negative cash flow subsidized by the Fed, as someone above noted. A sustained dip in subscriber growth or meaningful increase in interest rates and it’s a financial 404 for NetFlix.
As baby boomers we use Hulu for the few shows we watch. It’s worth $11.99/mo vs the same few shows at $100+ on cable, which we cut years ago.
Exactly. Only the method of distribution and barrier to entry is changing.
“TV Subscription Death March”
Shifting from one TV subscription to another. That is not exactly a death march.
I pay Verizon about $250/month for their triple play. Includes 2 DVRs and a regular HD box. I get every channel. The 3 boxes alone cost $50/month. I could save money by switching to their cloud service, but they’ve basically made it impossible for me to switch. I have to order it on-line and their web site is broken for me and they can’t fix it. I suspect it’s intentionally broken for me. I watch TV, but my 3 kids rarely do. I think my 2 year deal is up in August and I might switch to something else.
“…their shows have high production value and the subscription is cheap…”
The amount of money Netflix et al are throwing around Hollywood is absurd. And then, they turn around and give tickets away for essentially free to viewers! Relying on the Fed, by way of “investors,” to subsidize the party with money stolen from third parties via debasement.
Honestly, it is becoming a kind of bizarre, backdoor means of doing what the Euros have always been doing more overtly: Public subsidy of “entertainment.” With the same pitfall: Namely that when producers’ earnings are separated from end user spending on what they produce, they are no longer properly incentivized to spend their money wisely on what the public wants to watch. Instead having to focus on pleasing the vanities and superstitions of their paymasters. Who rarely mirror their audience very accurately.
Hollywood have always been a place where the wealthy go to throw away their fortunes on vanity displays. And is hence very well adapted to mop up ,and find ways to squander, whatever it can get it’s hands on. But this latest wave of Fed sponsored grandiosity, is so over the top, it manages to leave even those guys a bit dumbfounded.
Umm…I spent 15 years in SE Asia working and first the locations where I was, offered very slow or no internet. I used to carry DVDs in a small bag in case I needed some entertainment. Local TV was crap and dubbed movies even worse.
Then the connections got better and I used to watch Youtube or stream stuff. Found many channels that offer “free” service (including the first 5 or so ads that one needs to close before watching).
In our country we have advanced in digital TV and the quality of the picture in the horror box has gotten very good but the content is horrible. Boring old movies, idle talk shows about feminism and all the crap, bad soaps, and everything that I have no interest in. I belong to the group “have TV but very rarely open it”.
I watch a documentary or a movie from my laptop every evening if I am not too tired. I have no need for cable companies or Netflix. All their programs are there to be streamed also – legally, I might add.
Yep, wouldn’t place my bet on these companies.
Generalizing here, but if you want prime time Network shows, then Hulu is the streaming service for you. If you are more of a movie person, then Netflix is the (far) better service. Prime has alot of both – shows & movies – but the content quality is lower while the content quantity is overwhelming.
I think most people use/have Prime Video simply because it’s included with Amazon Prime in the first place, i.e. I doubt Prime would have 1/4 of it’s ‘subscribers’ if they had to made that purchase/choice independently of AP. Regarding Hulu, I can’t understand why anyone would cut the cord only to pay specifically for streaming network content… I mean, awful/insulting network content is a big reason to cut the cord in the first place. The fact that Netflix has never turned a profit in any quarter in it’s existence pretty much says everything you need to know about america’s ‘new’ economy.
As someone who cut the cord a couple years ago, I can identify two big advantages of streaming:
Narrower content packages are available, making it possible to save substantially on the monthly bill. Decent free content is available for those willing to spend time digging through sites like Youtube. I recently watched a couple Youtube videos where Sandy Munro, owner of Munro & Associates, Inc, gave a great overview of a $1MM teardown of the Tesla Model 3.
Cloud DVR service is usually included where all available content is served to the customer “on demand” with no additional equipment or additional DVR subscription, and one does not have to remember to record any shows. It is the ultimate in convenience.
If you ask me, Netflix is as much a wasteland of unwatchable content as any traditional cable service. I think the main thing growing their subscriber numbers is their shows have high production value and the subscription is cheap (for now). Once Disney leaves their platform and starts a competing streaming service in 2019, Netflix will have a tougher row to hoe.
I don’t even know what this story is about. What is a TV? Whatever it is, I haven’t watched one in 35 years.
I worked in the pay-TV biz for a long time and therefore got service for free. It’s unbelievable how much people are willing to pay for crappy TV, even from the “discount” carriers. As soon as I left the industry last year I stopped getting service and haven’t missed it for a second. I’d even say that (free) YouTube is vastly superior to the typical service offering a few hundred channels. It’s a near-total money sink.
BTW, Hulu used to be a little tempting with the whole Criterion Collection for movies, but they dropped it sometime back. It wasn’t enough to make me spring for them, but at least it crossed my mind, unlike the other carriers.
I’m betting that this means a lot more reruns of Gilligan’s Island and I Love Lucy. Goody!
I believe I was the one saying Netflix could double prices and still only lose 20%-30% of their current subscribers leading to much better financial situation on average for Netflix.
I believe Netflix is the new TV for majority of people who have used it a long time.
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When it comes to competition Hulu is owned by several large film/tv companies so it has gotten content at cheap prices but I still believe it is losing money.
If Disney buys Fox then it will have majority control of Hulu which could lead to others wanting more for their content or taking it to Netflix.
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When it comes to Amazon Prime I believe that too is losing money but Amazon can keep running it with their profits from their cloud business and selling almost everything under the sun on Amazon.
Mush u dont realise I have a Netflix and youtube button on my remote. Netflix won and once it gets paid on demand it will skyrocket
Every content provider will increase its rates, and therefore AT&T will increase its rates in January. That is a certainty, the only alternative would be to take down various networks permanently, and they can’t do that or they would lose many more subscribers than with the usual price increase.
So maybe AT&T won’t increase my cable price come January? because if they do, I will change back to Comcast and take their latest come-back offer.