Canadian research company Convergence Consulting Group estimated that 1.13 million U.S. TV households cut the cord in 2015, about four times the pace of 2014, with another 1.11 million expected to cancel their pay TV subscriptions in 2016 as over-the-top and mobile services continue to grow.
In its annual research report – The Battle for the North America Couch Potato – Convergence said that although pay TV revenue rose 3% in 2015 to $105 billion and should increase another 2% to $107 billion in 2016, it was far below the pace of OTT services. Convergence estimated that OTT revenue increased 29% to $5.1 billion in 2015, rising another 30% to $6.7 billion in 2016.
The pay TV universe continued to shrink – the report estimates that there was a decline of 1.13 million U.S. TV subscribers in 2015 (compared to 283,000 in 2014). Cord never/cord cutter households – those that do not subscribe to a pay TV service – also were on the rise to 24.6 million in 2015 from 22.5 million in 2014. Convergence estimates that 26.7 million households (an increase of 2.1 million homes) will join the cord-never/cord-cutter ranks in 2016.
Content spend increased for both traditional and online networks in 2015, with Convergence predicting traditional networks spent about $53.1 billion on content in 2015 (up 8%) while new players like Amazon, Apple and Netflix spent an estimated $7.1 billion in 2015 up 27% over the prior year. Increased spending is expected to continue for both sectors – Convergence estimates traditional networks will shell out $57.2 billion for programming in 2016 (up 7.7%), while non-linear providers will spend $8.7 billion this year, up 22.5%.