HBO, Starz fall victim to cord-cutting as OTT's star rises

Michelle Clancy | 22-01-2014

Premium cable networks — a segment that includes HBO and Starz — are losing ground in the TV subscriber game, even as over-the-top (OTT) streaming services like Netflix continue to grow.

A new study from the NPD Group has revealed that there has been a 6% age-point overall decline in US households subscribing to premium TV channels over the past two years — while households subscribing to subscription video-on-demand (SVOD) grew four points.

Netflix in particular has taken off, reaching 29.93 million US subs in the third quarter of 2013, up from 25.1 million a year before. It's also surpassed HBO in terms of subs, with the home of Game of Thrones clocking a flat growth rate and hovering around 28.7 million subscriptions in the US.

"As SVOD services have gained momentum, it's clear that some consumers are trimming their premium-TV subscriptions," said Russ Crupnick, senior vice president of industry analysis for The NPD Group. "As SVOD increasingly strives to become a channel itself, viewers might consider it to be an adequate substitution for other premium channels, or perhaps they are switching to economize on their time and money spent."

Overall, SVOD and premium nets can claim fairly equal audiences: 32% of US households were subscribed to premium-TV channels in August of 2013, compared to 27% of US households that subscribed to SVOD services.

NPD said that Netflix remains the clear leader in SVOD; however, Hulu Plus and Amazon Prime are reaping the biggest growth benefits in the category, as consumers tack on secondary SVOD services.

Overall digital-video transactions (defined as purchases and individual paid rentals, not including free on-demand movies and TV shows included with a pay-TV subscriptions) have risen three share points since 2012, reaching 70% of all home-video transactions in 2013.

In contrast, in 2013 SVOD made up 71% of all digital-video transactions, and it continued to grow faster than all other digital acquisition types.