Erosion of Subscription Video is About 1% a Year

The strategic problem faced by traditional video subscription services is not that massive customer desertion is happening now. In fact, attrition, though real, is rather low at the moment.

According to The Diffusion Group, nearly 88 percent of all adult broadband Internet access users in the United States subscribe to a cable, satellite, or telco-TV service.

“The notion that we’re on the edge of a ‘mass exodus’ from incumbent pay-TV services to online substitutes is not supported by the data,” says Michael Greeson, co-founder of TDG and director of research.

The longer term problem is that younger consumers do not seem to buy the product as heavily as older consumers. And unless that changes, trouble lies ahead.

For example, TV subscription rates among those 25 to 34 are 82 percent, and 85 percent among those 18 to 24.

Note that the TDG metric is adoption of subscription TV among “broadband households.”

Of course, since household adoption of broadband Internet access is itself a percentage of all occupied U.S. homes, the adoption of video entertainment services as a percentage of all occupied U.S. homes might be  lower than 88 percent.

U.S. broadband penetration is estimated at 78 percent of U.S. homes. If 88 percent of those homes buy a video service, then video penetration hypothetically (some homes buy video service but not broadband or dial-up access) could be as low as 69 percent.

Nobody believes video subscription rates are that low, estimating that more than 102 million U.S. homes actually buy a subscription. That compares to about 115.6 million TV households altogether, including homes that only watch over the air TV.

If there are about 130 million occupied homes, that implies video subsription penetration of about 78 percent, oddly enough the same penetration rate as broadband.

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