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Estimated 1 Million Pay-TV Users Cut Cord for Web in 2011

Photographer: JB Reed/Bloomberg

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Photographer: JB Reed/Bloomberg

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More than 1 million U.S. pay- television customers dropped subscriptions in 2011, prompted by a flood of films and TV shows available online at services like Netflix Inc. (NFLX), according to a research report.

About 2.65 million subscribers to traditional cable or satellite TV service have canceled since 2008 to rely solely on Web-based choices, according to the estimate yesterday from Toronto-based Convergence Consulting Group Ltd. The dropouts include an estimated 1.05 million in 2011.

“It’s pretty obvious that there’s actual cord-cutting going on in the U.S.,” Brahm Eiley, president of Convergence Consulting, said in an interview.

The pace of defections may slow this year as content owners tighten online access to shows and prices increase, Eiley said. The researcher estimates about 930,000 customers will cut the cord this year, for a total of 3.58 million by the end of 2012. That equates to about 3.6 percent of subscribers.

Pay-TV services, including traditional cable and satellite as well as those from telephone companies Verizon Communications Inc. (VZ)’s FiOS and AT&T Inc. (T)’s U-verse, will add a net 185,000 accounts this year, up from 112,000 in 2011, Convergence Consulting estimates.

In Canada, where online alternatives are fewer and less robust, an estimated 222,000 TV subscribers were added in 2011, an amount that will shrink to 180,000 this year.

Netflix ended 2011 with 21.7 million U.S. streaming subscribers. Programming costs have skyrocketed this year, Convergence Consulting estimates.

Netflix declined 0.9 percent to $112.96 at the close in New York yesterday. The shares have gained 63 percent this year.

To contact the reporter on this story: Anthony Palazzo in Los Angeles at apalazzo@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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