Cord-Shaving Becoming New Concern for the Pay TV Industry

The number of cable channel subscribers has decreased over the past four years, but it is not necessarily a result of viewers completely “cutting the cord.” Rather, many viewers are now “cord shaving,” or opting for smaller, cheaper cable bundles. These bundles do not include popular channels like CNN, ESPN or TNT. Those channels, and the others in the top 40 most distributed channels have lost more than 3 percent of their distribution, 3.2 million subscribers, in the past four years.

family-TVThat loss in subscribers is due only in small part to cord cutters, or people who completely abandon their cable subscriptions for cheaper online alternatives such as Netflix and Hulu. Last year was the first annual decline in subscribers for the pay TV industry with a loss of 166,000 subscribers. Cord-cutting may currently be limited in scope, but it remains a significant concern in the long term.

Meanwhile, the basic cable plans that include mostly local broadcast stations are on the rise. These $10 to $50 bundles used to make up 8 to 10 percent of pay TV subscriptions. Now they make up about 12 percent. Other consumers may also purchase the sports-free or family-friendly packages to save money.

The trend seems unlikely to reverse, and that could put a financial strain on media companies and cable companies alike. Cable companies and satellite companies pay the media companies for their channels on a per-subscriber basis. Also, more basic cable plans bring in less revenue for the cable or satellite provider.

According to The Wall Street Journal, some media companies are optimistic that they can overcome the loss in subscribers with the hike in per-subscriber fees and the sale of their content to Internet TV services. Others are worried that selling the rights to their content to Netflix and other streaming services has undermined the business model that the pay TV industry was built upon.