The trouble with so-called cord cutters for companies like Walt Disney Co.’s (NYSE: DIS) ESPN and cable TV giants has grown exponentially this year. According to research firm eMarketer, the population of people who have disconnected from traditional cable programming has jumped to 22 million.
The research firm reported:
This year, there will be 22.2 million cord-cutters ages 18 and older, a figure up 33.2% over 2016. The overall tally is much higher than the 15.4 million eMarketer previously predicted. Meanwhile, the number of US adult cord-nevers will grow 5.8% this year to 34.4 million
The trend is much more pronounced among younger Americans who access programs via broadband connections rather than pay high subscription rates for cable programming bundles, which can cost over $100 a month.
eMarketer principal analyst Paul Verna commented on the effects of the trend:
The acceleration of cord-cutting is the result of several factors. First, traditional pay TV operators are increasingly developing streaming platforms, such as Dish Network’s Sling TV. Second, networks such as HBO and ESPN have launched standalone subscription services that allow users to tap those channels without a cable subscription. And third, digital players like Hulu and YouTube are now delivering live TV channels over the internet at reasonable prices—including sports properties that were previously available only through traditional distribution.
Widely viewed cable channels such as ESPN are sold as part of cable bundles. Disney’s revenue and share price have suffered because of the cord-cutting trend. Companies that rely on bundled sales have not solved the loss of revenue associated with the transition away from traditional means of delivering premium programs. Standalone services may not be nearly as profitable as the current cable program model.
ESPN and other entertainment businesses that rely on cable program bundles are not dead, but the data show they are bleeding fast.
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