Cord cutting, or people dropping their cable or satellite TV in favor of online video alternatives like Netflix, has reached a critical milestone. For the first time, more people pay for a streaming service than subscribe to traditional pay TV, a new survey has found.
Sixty-nine percent of consumers pay for Internet video versus 65% for cable or satellite television, according to consulting firm Deloitte, which published the report on Tuesday. The proportion of people paying for Internet video has skyrocketed while the proportion on traditional pay TV has dipped in recent years. Just 10% of consumers streamed in 2009, rising to 55% last year. Pay TV subscriptions hovered above 75% for years, but Deloitte said they changed how the question was asked since last year’s survey.
The 2018 trend was most pronounced among the youngest Americans, the survey found. Among those in Gen Z, currently age 14 to 21, 80% subscribe to Internet video while only 57% to pay TV. And among millennials, age 22 to 35, 88% subscribe to Internet video and 51% to pay TV.
In total, 43% of all U.S. consumers subscribe to both pay TV and Internet video, Deloitte said. People who pay for online video, on average, subscribe to three streaming services.
But the survey also found growing frustration with the growing number of online options. In addition to current market leaders Netflix (NFLX), Hulu and Amazon‘s (AMZN) Prime Video, many new players have entered the subscription Internet video market including AT&T (T), CBS (CBS) and Google (GOOGL).
Meanwhile, Disney (DIS) and Apple (AAPL) are expected to unveil major new services later this year. Both are trying to play catch up after failing to catch the first wave in the online video business.
“With more than 300 over the top video options in the U.S., coupled with multiple subscriptions and payments to track and justify, consumers may be entering a time of ‘subscription fatigue,'” Kevin Westcott, vice chairman and U.S. telecom and media and entertainment leader at Deloitte, said in the report. Media companies will have to “keep a close eye on consumer frustrations, including advertising overload and data privacy concerns.”
Asked for the top reasons why they opted to pay for Internet video service, 57% cited getting access to original programming and 44% said to avoid advertising, the survey found. Some 29% said they use an Internet service to access live television broadcasts. (Respondents could select more than one response)
The Deloitte data, based on responses from 2,003 consumers from December 2018 to February 2019, is consistent with the findings of other surveys. The rate of consumers dropping their cable and satellite TV packages hit the highest level ever in the last three months of 2018, with a net 985,000 cutting the cord at the largest providers, analysts at MoffettNathanson Research reported last month.
Major pay TV providers like Comcast (CMCSA) and AT&T (T) say that they’re benefitting from the trend, too, since they sell Internet service. And they’re offering more Internet programming via the major entertainment acquisitions they made of NBC Universal and Time Warner, respectively.
The cord-cutting trend, which started decades ago with consumers dropping landline phones for mobile numbers, is even starting to hit Internet service. It’s also prompting more people to go back to using an antenna to pick up free TV broadcast over the air.
(Update: Added data from prior years of the Deloitte survey.)
