Netflix Stealing Pay-TV Customers

Media

Published: June 14, 2014 9:45 am

Last Updated: April 28, 2020 2:29 am

U.S. consumers like their Internet TV. They like it so much, in fact, that 49% of all U.S. households now have at least one TV set connected to the Internet either by a video game system, a Blu-ray player, a smart TV or an over-the-top (OTT) set-top box. In 2010 the percentage was 24%, and in 2012 the percentage was 38%.

Overall, nearly a quarter of U.S. adults watch videos on an Internet-connected device at least weekly, up from 5% four years ago and 13% two years ago. The data were reported last week by Leichtman Research Group.

For cable and satellite pay-TV providers, that’s not the worst news. The worst news is that as more people subscribe to Internet video services, more of those subscribers are dropping their subscriptions to pay TV. In 2010, some 88% of subscribers to Netflix Inc.’s (NASDAQ: NFLX) streaming video service also subscribed to pay TV. That percentage fell to 85% in 2012 and is now 80%.

Some other striking data points from Leichtman’s research:

48% of all non-subscribers to pay TV are subscribers to Netflix, up from 16% in 2010 and 29% in 2012.
47% of households subscribe to Netflix, Amazon Prime and/or Hulu Plus.
49% of Netflix subscribers watch Internet video weekly, compared with just 8% who use another Internet subscription service.

Netflix has maintained for a long time that it is not a competitor to pay-TV services but rather a complement to cable and satellite offerings. Leichtman’s research should disabuse the pay-TV companies of that notion. Whether or not Netflix intended to aid and abet cord-cutters is arguable. What is not arguable is that a lot of consumers are happy with the Internet video service combined with the free over-the-air broadcast networks. That is very bad news for cable and satellite companies.

ALSO READ: Why One Analyst Sees Netflix Rising to $500 Soon

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