Cable groups suffer as viewers switch to video streaming

Netflix, the DVD subscription service that also offers movies to be streamed online, has a share performance chart most companies would kill for. A year ago the stock was trading at $58; last week, after 12 months in which the company began to attract attention for its willingness to buy digital rights to Hollywood movies, the shares were hovering around $187.

The company launched a $7.99 streaming-only subscription service last week, which fuelled a further jump in the shares. Yet its expansion, and the growth of rival online video services, such as Hulu, has come at a cost. Debate is raging in the US media industry about television viewers “cutting the cord” – abandoning traditional cable TV in favour of new, cheaper online video services. Recent data appear to support the theory that consumers are shifting online.

Although the number of people subscribing to TV services offered by satellite or telecoms groups is growing, cable TV subscriptions have suffered their biggest drop in 30 years, according to figures compiled by SNL Kagan, the research firm. It is unclear how much of this decline can be attributed to online alternatives, although the high cost of TV services is clearly an issue, according to Spencer Wang, a media analyst with Credit Suisse.