University of Mary Washington University of Mary Washington
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Research and Creativity Symposium Research Symposia
4-29-2021
The Effect of Net6ix on U.S. Cable TV Subscriptions The Effect of Net6ix on U.S. Cable TV Subscriptions
Luke Lilienthal
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Lilienthal, Luke, "The Effect of Net6ix on U.S. Cable TV Subscriptions" (2021).
Research and Creativity
Symposium
. 121.
https://scholar.umw.edu/rcd/121
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The Effect of
Netflix on U.S.
Cable TV
Subscriptions
By: Luke Lilienthal
Intro
Cable TV began as a way to relay the
programs from broadcasting networks in
remote areas where signals are hardly reached
or not at all.
The annual number of Basic Cable
Subscriptions in the U.S. is calculated based
on the total number of subscriptions to basic
cable television. This means any extra channel
packages or upgrades are not included in this
variable, only the bare minimum subscription.
Basic Annual Cable Subscriptions in the U.S.
have been declining since 2001, which is the
same year Netflix began recording subscribers.
The goal of this research is to determine
whether Netflix impacted and played a role in
the decline of Basic Annual Cable
Subscriptions
Literature + Research
On Netflix from the years of 2010 to 2016, “the number
of hours of video entertainment consumed has grown by
about 700%,” (Patchunka vol. 71 page 279)
According to the same study, “about six in ten young
adults primarily use streaming services to watch TV. For
viewers ages 18-29 years old, 61% watch TV through
online streaming services, compared with 31% of that
same age group watching via cable or satellite
subscriptions. Compare this to the percentages for all
adults in the U.S. in which 28% of adults watch TV
primarily online via streaming services and 59% watch
via traditional cable or satellite subscriptions,”
(Patchunka vol. 71 page 279).
Netflix subscription cost (currently $10.99/month)
increasing should have a positive impact on the amount
of cable subscriptions; however, given that, “the
standard Netflix subscription costs roughly 9% of the
monthly cable TV subscription and only about $29 more
for a whole years’ worth of Netflix compared with one
month of cable, (Chung pg. 14)”, there seems to be no
monetary benefit of switching to cable even if the
Netflix subscription cost were to increase more.
Model
Basic Cable Subscriptions = a – Basic
Netflix Subscriptions
i
+ Basic Cable
Subscription Cost
i
– Basic Netflix
Subscription cost
i
+ Annual U.S.
Household Income
i
+ e
i
Basic Netflix subscriptions is the total amount
of standard subscriptions on Netflix and
should influence the Dependent Variable
directly because it is a cable alternative.
Basic Cable Subscription cost, which is the
dollar amount for a basic cable subscription,
no extra packages, or channels.
Basic Netflix Subscription cost, which is the
dollar amount of the standard Netflix
subscription, no upgrades.
Annual U.S. Household Income, which is the
average household income in the U.S. in
dollars.
Data
Variable Mean Standard
Deviation
Min Max
Basic Cable
Subscriptions
(in millions)
59.43 5.95 49.2 66.9
Basic Netflix
Subscriptions
(in millions)
25.18 44.93 0 167.09
Basic Cable
Subscription
Cost (in USD)
in year t
42.85 19.84 15.21 75.85
Basic Netflix
Subscription
Cost (in USD)
in year t
4.74 4.29 0 12.99
Annual
United States
Income Per
Household (in
USD)
59,546.97 3,151.2 54,581 68,703
N = 31 t = a given year from the data set
Given that Netflix did not obtain subscribers
until 2001, that is why the Basic Netflix
Subscriptions and Basic Netflix Subscription
Cost have a minimum of 0 as the data taken
for this research was gathered from 1989-
2019.
Regression Results
(Intercept)
Basic Cable
Subscription
s (in
millions)
-26.94
(-1.98)
Basic Netflix
Subscription
s (in
millions)
-0.18
(-7.99)*
Basic Cable
Subscription
Cost (in
USD) in year
t
0.12
(1.07)
Basic Netflix
Subscription
Cost (in
USD) in year
t
-0.15
(-0.29)
Annual
United
States
Income Per
Household
(in USD)
0.001
(6.28)*
R
2
N
0.77
31
Note: t-statistics in parentheses
* denotes significance at the 95% level.
Continued…
I regressed the dependent variable, Annual
Cable Subscriptions, on the following
independent variables: Annual Netflix
Subscriptions, Annual Income per Household,
Cost of Netflix Subscription, and Cost for
Cable Subscription.
There were two independent variables be
significant at the 95% level: Annual U.S.
Household income and Basic Netflix
Subscriptions.
Annual U.S. Household Income directly
impacts a consumer’s choice to purchase
goods/services, so given that average income
will increase over time, so should Annual
Basic Cable Subscriptions.
Basic Netflix Subscriptions is an alternative
good/service and therefore makes sense that it
should negatively impact cable subscriptions
when it increases.
Conclusion
Although the regression results did support the
original hypothesis, it is worth noting that Netflix
is just one of many digital streaming platforms
and may not be the industry leader forever. Cable
Television has been something that has been
around for a long time and doesn’t seem to be
going away any time soon.
Cable TV once used to have exclusive content
from main channels such as ESPN, ABC, etc., but
now anyone can stream all this content on
platforms like Netflix, Disney Plus and many
more.
For future research I would love to add data from
multiple other streaming platforms like
previously mentioned to more accurately depict
how streaming platforms influenced basic cable
subscriptions.
In the end, this research was able to explain 77%
of the variance in basic cable subscriptions using
just Netflix, which leads us to believe that Netflix
has certainly had some level of impact on cable
subscriptions.
Bibliography
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Continued…
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Continued…
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Appendix
Continued…
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
Cost of Subscription
Year
Graph 2.
Average Monthly Cost of Subscription
(1989-2019)
Basic Cable Subscription Cost Basic Netflix Subscription Cost
Continued…
