Consumers cut pay-TV service for Web-based programming.
— -- In July, the Benediktssons of Chandler, Ariz., declared their independence from cable television.
After watching their monthly bill steadily increase to $90, the family dropped their pay-TV subscription. But they didn't totally cut the cord.
Instead, they kept their Internet service from Cox Communications and use it to connect to Netflix for movies and TV shows such as Grey's Anatomy. "We decided to start trimming where we could, and the cable bill was low-hanging fruit," says Baldur Benediktsson, 44, a website content manager.
He and wife, Kristin, also use a Roku set-top box to stream programs to their living room TV. A pair of rabbit-ear antennas receive local over-the-air digital TV signals displayed on 23-inch and 27-inch computer monitors that double as HDTVs.
Cable TV, he says, "gave us too much service for too much money, and we really didn't need it at all."
Lots of other viewers out there feel the same way. Nearly every pay-TV provider is leaking subscribers.
The nation's largest cable company, Comcast, lost 238,000 TV subscribers in the second quarter of this year; and No. 2 Time Warner Cable lost 130,000. Satellite TV provider Dish Network lost 135,000 subscribers. Its larger competitor, DirecTV, added 26,000, but that's down from the 100,000 it added in the second quarter last year.
Obviously, one of the primary drivers of cord cutting is the nation's economic woes. The unemployment rate is stuck at 9.1%, and U.S. economic growth slowed to 1% in the most recent quarter. "People that are unemployed or underemployed … have to cut their expenses," says Norm Bogen, analyst at market research firm In-Stat, "and one of the things they can cut is their pay TV."
But there's also tumultuous change going on in the TV business. The number of U.S. homes with traditional TVs has dropped slightly, from 115.9 million to 114.7 million, says Nielsen Media Research. Yet, total TV viewing is on the rise, because more viewers are watching Internet-delivered video on a PC, tablet computer or smartphone, Nielsen says.
As Internet video options evolve, an increasing number of pay-TV customers are dropping their service or sliding to a lower tier of service — and using the Web to get their entertainment content. Some, like the Benediktssons, are adding antennas to watch local channels live via free, over-the-air digital TV signals. "The lock over the consumer that the cable companies once enjoyed … has been blown to pieces," says Michael Greeson of market strategy firm The Diffusion Group.
Consumer à la carte
For years, consumer advocates have argued for à la carte programming options for consumers on the theory that paying for only the cable channels you wanted — instead of a package of a hundred-plus channels — would be cheaper. Cable companies never budged.
Now, consumers have the technology to cobble together their own programming packages. But it's not all in one place.
"If you drop pay TV, you've got a couple places to go to get what you want," Bogen says.
Related Stories
ABC News Live