The Effect of Netflix on U.S. Cable TV Subscriptions

By Luke Lilienthal

Faculty mentor: Professor Margaret Ray

Basic Annual Cable Subscriptions in the U.S. have been declining since 2001, which is the same year Netflix began recording subscribers. 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. The purpose of this study is to determine whether Netflix’s emergence directly impacted the rate of Basic Cable Subscriptions. This research is based on the years 1989-2019, for reference. This study contains has 4 independent variables. Basic Netflix subscriptions, which 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. Lastly, Annual U.S. Household Income, which is the average household income in the U.S. in dollars. In the years prior to Netflix (1989-2000), Basic Cable Subscriptions rose from 49.2 Million to 66.6 Million subscribers, a 35-percent increase. This was the peaking point for Basic Cable Subscriptions and since 2001, their subscriber count has fallen back down to 50.5 Million, nearly a 24-percent decrease. Given that Basic Cable Subscriptions is a normal good and tends to go up with income, seeing in the data that it declined in the past 15 to 20 years as Netflix emerged and grew rapidly draws the conclusion that Netflix directly impacted Cable TV subscriptions. The regression results are able to explain 77% of the variance in Cable TV Subscriptions and only contains Netflix, not any other widely used streaming services.