As the debate over just how quickly consumers are abandoning pay TV and “cutting the cord” rages on, pay Internet video services are growing fast.
Premium Internet video services from Netflix (NFLX) to Hulu to Dish Network’s (DISH) Sling TV brought in $8.3 billion last year, a 36% increase from 2015, according to the annual “Coach Potato” report from market tracking firm Convergence Research Group. Bolstered by new additions like AT&T’s DirecTV Now and Google’s (GOOGL) YouTube TV, the market should increase 35% to $11.2 billion this year followed by 32% jump to $14.7 billion 2018, the firm said.
At the same time, the number of households that have cut the cord, or never subscribed in the first place–so called cord nevers–is growing.
Last year, 2.1 million households dropped pay TV service, up from 1.2 million in 2015, Convergence said. By the end of the year, 27 million households, or about 22% of the country, did not pay for cable or satellite TV service, up from 24 million, or 20% of households, in 2015. And the total should reach 30 million, or 25% of all households, by the end of 2017, Convergence said.
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Fears that rampant cord cutting will hurt cable and entertainment company revenues have been a growing fear on Wall Street, especially after the issue hit the stock prices of giants like Viacom (VIAB), Time Warner (TWX), and Disney (DIS) hard in the summer of 2015. But since then, the data about cord cutting has been mixed and the stocks have recovered.
Competition coming for Netflix:
Even if cord cutting picks up, as Convergence expects, the trend isn’t totally negative for the cable industry, since it’s also the leading provider of broadband home Internet service. The high-speed home Internet market added 2.5 million subscribers, a 3% rise to 94.5 million homes, and grew 9% in revenue to $51.3 billion last year, Convergence said.