The drop in Netflix’s (NFLX) stock has some thinking that the bloom is off the Internet video rose. However, “cord cutting” — consumers that replace traditional TV with Internet video — is a trend that’s here to stay, says MagnaGlobal in a new report.
About 8% of all TV homes (8.9 million) will have only OTT (over-the-top) video in 2016, up from an estimated 3 million at the end of 2011, says MagnaGlobal’s Media Access Quarterly, released Wednesday.
In 2016, about 56% of the OTT homes will be “cost savers” that never had a pay-TV subscription, while 44% will be video cord cutters that replace traditional TV with Internet service, it says.
Internet-connected TVs as well as game boxes, such as Microsoft’s (MSFT) Xbox, will fuel the trend, says MagnaGlobal.
Some market studies have predicted even great cord cutting.
On the other hand, Nomura analyst Mike McCormack says that the threat of consumers dropping pay-TV for free Internet video has been reduced “by the intelligent actions of leading content producers.” He points to Starz’ recent decision to walk away from a deal with Netflix. Content producers are experimenting with new delivery models. Paramount Pictures, for example plans to stream older movies from its website.