Cord Cutting to Drive Greater Spending on Streaming Video Like Netflix

Streaming video services like Netflix, Hulu, and a planned rival from Apple will see their total U.S. revenue jump 64% over the next five years to almost $24 billion annually, benefitting from the continued growth of cord cutting, according to a report published on Wednesday.

Meanwhile, revenue from cable and satellite TV service providers like Comcast (CMCSA) and AT&T (T) will collectively shrink 16% to $84 billion over the same period, the report by accounting and consulting firm PwC said.

The divergent trajectories highlight the huge shift in the home entertainment business, as consumers drop their pay TV subscriptions. In just the past few years, millions of people have cut their cable cords and signed up for streaming video services instead.

And the rate of cord cutting continues to gain momentum, PwC said. Only 67% of consumers in households with annual incomes above $40,000 paid for cable or satellite TV in 2018, down from 73% in 2017 and 77% two years prior.

The findings are consistent with other reports. For the first time, last year more people paid for Internet video services than cable or satellite TV, a survey by PwC-rival Deloitte found. And various studies, including Convergence Research’s annual “Coach Potato” report and the quarterly cord-cutting monitor from MoffettNathanson Research, have lately found the cord-cutting trend breaking records.

In an effort to attract more of those cable-free viewers, the Internet services are spending billions of dollars to recruit top Hollywood talent. Apple (AAPL) has deals with Oprah Winfrey and Steven Spielberg to produce exclusive programs, for example, while Netflix (NFLX) has signed up Barack and Michelle Obama for a multi-show production deal.

In addition to Apple, Disney plans to get into streaming video with its own service soon, bringing together movies from a vast array of different franchises, like Star Wars, Pixar, and Marvel Comics.

But while consumers may be saving money and gaining the flexibility to watch shows on their own schedules, they do long for the days of having a single provider, PwC said. Around half said they wanted to pay one monthly fee for all their video services and wished all video would be available from a single service eventually.

However, that’s unlikely to happen. Big programming producers like Disney, AT&T (which bought Time Warner last year), and Comcast’s NBC Universal unit are expected to move in the opposite direction and pull shows from competing platforms like Netflix.

Some new forms of media are growing even more quickly than streaming video, but they’ll account for very little of the total spending on entertainment even five years from now, the report found. Spending on podcast ads will almost triple, but still total only about $1.4 billion in 2023, PwC said. Ad and subscription spending for e-sports and virtual reality will each more than double, but total only $516 million and $2 billion, respectively, in five years.

In related trends, TV advertising will remain almost stagnant at $72 billion a year, while Internet advertising will rise 50% to $161 billion, the report said.