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With an increasing selection of high-quality TV fare coming online, more people are experimenting with ditching their TVs (or more accurately, their cable and satellite TV subscriptions) for online options such as Hulu, Netflix, broadcaster Websites, or Apple’s iTunes. The numbers are still small, but last year an estimated 800,000 U.S. households cut the cable cord altogether, according to a new report by the Convergence Consulting Group. By the end of next year, that number is forecast to double to 1.6 million.
Cord cutters don’t yet represent a serious threat to the $84 billion cable/satellite/telco TV access industry, which counts an estimated 101 million subscribers. But they are a leading indicator of the shift to TV viewing on the Web. The cord-cutters make up less than 3 percent of all full-episode viewing on the Web. The rest comes from people who are only beginning to watch occasionally online. An estimated 17 percent of the total weekly viewing audience watch at least one or two episodes of a full-length TV show online. Last year, that percentage was 12 percent, and next year it is forecast to grow to 21 percent.
As more and more viewing options become available online, more people will add Web viewing as part of their mix. For instance, in my home we don’t have a TV in the kitchen, but we keep a laptop there. And the easier it becomes to connect your computer to your flat screen TV, the more the online video sites and services will become just another set of channels.
The free, advertising supported model is still the most popular. Although Apple is making noises about making Apple TV more than just a hobby and doubled the number of TV shows available for download last year, Convergence estimates only 100 million episodes were downloaded last year, up from 90 million in 2008. The associated download revenue was only $200 million.
Meanwhile, Convergence estimates that U.S. online TV advertising by the likes of CBS, Disney/ABC, NBC Universal, News Corp., Time Warner, and Viacom made up 2.5 percent of their estimated $62 billion of traditional TV advertising revenues last year—or an additional $1.56 billion (which is above other estimates putting all online video advertising last year at $1 billion).
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