US Internet Households Shifting Away from Traditional Pay TV

A growing number of US internet households are cutting the cord, with 56 million households, or 46%, now characterizing themselves as “cord cutters”. This trend is also seeing 12% of households, or “cord nevers”, who have never subscribed to traditional pay TV.

The shift is driven by the rise of free-to-air broadcasts and online video services, with service providers adapting by offering competitive pricing, bundling options, and hybrid monetization strategies. The growth of ad-supported video-on-demand (AVOD) and free ad-supported streaming TV (FAST) services shows the demand for lower-cost alternatives.

Streaming services are finding ways to monetize the “cord nevers” segment, which has not previously valued subscription video. Many consumers prefer the basic tier with ads over the more expensive premium tier with no ads. As of Q3 2024, 59% of subscriptions across the leading streaming services are basic tier with ads subscriptions.

To achieve profitability and strike a balance for consumers, many popular services now operate under a hybrid model, offering both ad-free and ad-supported plans. Ad-based tiers are cheaper for consumers and more profitable for businesses, making them a win-win for both parties.

Consumers are driven to pare down their spending due to continued increases in streaming and high inflation. This intensifies the competition among streaming vendors, fueling the growth of subscription tiers with ads and free ad-based services.

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