Pay TV 'Cord Cutting' Is Officially a Real Thing

After years of flat cable growth and numbers that could neither confirm or deny cord cutting, the pay TV industry is now, officially, shrinking.

After years of flat cable growth and numbers that could neither confirm or deny cord cutting, the pay TV industry is now, officially, shrinking. As you can see in the chart below, via Moffett Research, total subscriber growth has been slowing since 2011, and declining since the end of 2012. The numbers even have TV analyst Craig Moffett, who has denied the "urban myth" for years, calling the trend real. "Cord cutting used to be a myth. It isn’t anymore," Moffett writes in a new note. "No, the numbers aren’t huge. But they’re statistically significant."

Earlier this year, Moffett had hinted at that reality, noting that TV's flat growth suggested a "proof-positive" shift in the way people watch television. "Pay TV is unmistakably declining and the rate of penetration decline is accelerating. The very fact that there have recently been more new households being minted each year than there have been new pay-TV households is proof positive that cord cutting is real," he wrote in a 135 page report. But, this is the first time he's admitted to a notable decline in subscribers.

This group, couple with the growing "cord never" generation of people that have never signed up for cable and maybe never will, who don't get counted in numbers like these, suggests that a pretty significant chunk of the population is seeking entertainment elsewhere, most likely on the Internet. Between Netflix, Hulu, Amazon, and HBO Go, with a mixture of legal and semi-legal techniques, a person can get a solid amount of on-demand programming for a lot cheaper than the average $73.44 a cable subscription costs. For people who don't watch sports or live television, it's a particularly good deal.

Cable, on the other hand, has gotten too expensive for what it offers. Most of the cord-cutters are lower income households, says Moffett. TV bills have increased six percent a year, and are expected to continue increasing as the cost of content for cable companies accelerates. People with less disposable income can't keep up. In addition, for just $7.99 for a Netflix account and some (free!) shared HBO Go passwords, you can keep yourself occupied for a tenth of the price.

The future, at least for a lot of consumers, is the Internet, which actually isn't a terrible thing for the cable companies, who own the broadband connections that run all that streaming video. And now that some people in the cable and satellite business have accepted that reality, maybe these companies will work harder to offer services and bundles that better suit consumers needs.