Cord cutting is definitely a trend that’s happening in the US, but it is also happening here in Canada as well.
Recently, while reporting on the NBA inking a deal with Amazon, I mentioned how this trend of major league sports increasingly becoming available on online streaming platforms could increase cord cutting. So, today, I thought I’d go more into this particular topic.
Back in January, I mentioned how cord cutting is skyrocketing in the US. In that report, in 2023, pay TV subscription rates in the US were nearing 50%, a downward trajectory from the late 2000’s.
Now, there’s a good set of reasons why this is happening. News rooms are not getting the investment they nee to deliver a quality product. TV broadcasters have focused on shovelling the cheapest programming money can buy out the door. As a result, product quality suffers greatly.
At the same time this is happening, online offerings are increasingly great. Anyone can create whatever content they want to make, the content is often on demand, and the quality is generally much higher quality overall. So, you get that push pull effect leading to online offerings.
This all leads to some consumers asking why they should spend all day, for instance, watching a 24 hour news channel repeat the same two or three stories over and over again when they can go online, read those same stories in the span of a few minutes, and move on with their day.
Further compounding matters is the fact that consumers are getting squeezed everywhere. There’s an affordability crisis that is hitting younger generations like a tsunami where shelter costs are through the roof, the price of groceries are moving upwards, and wages are continuing to get suppressed. It’s generally much cheaper to just cut television as that’s just a luxury item anyway. You’re not getting much in the way of benefit and it’s generally a waste of money after a while.
What broadcasters executives end up seeing is that beginning of a trend of cord cutting. As a result, their profits start to slide. Those executives could work on creating a better product, but that costs money. So, that generally quickly gets dismissed as an option. Additionally, those same executives demand that their companies get increased profit margins as time goes on to satisfy shareholders, not decreasing profits. So, what they typically do is jack up the prices for everyone else to make up the difference.
This ends up leading to a vicious circle because when consumers see the higher prices, they start asking very similar questions to the previous cord cutting. It’s generally something along the lines of how TV is nice and all, but they’re not really getting a huge benefit from having it. With the higher prices hitting, something has to give. So, television is what gets cut from the budget. The executives see more people cutting the cord, then just repeat the same trick of just jacking up the rates on the remaining consumers to make up the difference. The circle then just keeps repeating over and over again.
While the cord cutting phenomenon is well documented in the US, what about Canada? As it turns out, it’s a very similar story. Indeed, even Telus has mentioned that cord cutting is an issue they are noticing, so it’s not just me finding annoying evidence laying around to make a case. Others have noticed this trend as well. What’s more, according to a report from earlier this year, some analysis suggest that people without a TV subscription could be either the majority or close to the majority by the end of 2026. From CTV:
A new report suggests Canadians’ television viewing habits continue to shift toward streaming platforms at the expense of traditional cable and satellite subscriptions, at a time when the federal regulator is considering new rules to help level the playing field across the sector.
The annual Couch Potato Report released Monday by Convergence Research says 42 per cent of Canadian households did not have a TV subscription with a traditional provider by the end of last year. It forecasts that by the end of 2026, half of all households won’t be traditional TV watchers.
Meanwhile, the report says more than 80 per cent of Canadian households subscribe to a streaming service, while 70 per cent subscribe to both TV and one or more streaming services.
Last year saw 2.6 per cent of Canadian TV subscribers cut the cord, as the revenue brought in by traditional TV providers declined three per cent to $7.2 billion – a pace the report predicts will continue through 2026.
Meanwhile, streamers’ Canadian subscription revenue rose 14 per cent in 2023 to $3.73 billion and is forecast to reach $4.24 billion this year.
“It’s kind of a no-brainer that the alternative is going to be, and continues to be, the Netflixes and the Amazons and the Apples of the world. This is where your content lives,” said Convergence Research president Brahm Eiley.
What’s striking about all of this is the fact that the Canadian government has spent years trying to prop up the legacy broadcasters through Bill C-11 (now the Online Streaming Act) and Bill C-18 (now the Online News Act). The Canadian government is essentially trying to prop up these legacy broadcasters in order to help them deliver a product increasingly fewer Canadian have any interest in consuming. These are some of the statistics that back up these claims.
This is what also makes the story of major league sports increasingly moving to where the audience is – in the online space. There’s a huge contingent of Canadian’s who are heavy into sports. Major league sports is where broadcasters wind up netting a huge portion of their revenue from. Thanks to exclusive deals, those offerings don’t really exist in the online space.
In recent years, however, that is gradually changing. There was the NFL Sunday ticket being awarded to YouTube, the MLS signing a deal with Apple TV, and, more recently, the NBA expanding their offerings to Amazon. That wall of exclusivity that has protected the last remnants of their audience is beginning to crumble. As that exclusivity weakens, it unleashes the last real remaining reason for people to stick to traditional broadcast TV, increasing the potential for more cord cutters in the future.
Because of executives responding to cord cutters by increasing rate continuously, as long as they keep feeding that vicious circle, it’s a story that’s inevitably going to end at Chapter 11. Sure, the government can subsidize the living daylights out of those broadcast producers, but without an audience, there’s no return on investment. As long as television executives continue to shun improving their product for consumers, the direction this story has taken will only continue on that trajectory in the long run. This will also lead to consumers increasingly tuning out and moving to the internet.
