• by Sean Hargrave , Staff Writer, July 19, 2018

There was a landmark moment in UK digital media yesterday, and no I'm not talking about that record $5bn fine against Google. In a busy news day, an observation slipped through almost unnoticed. There are now more streaming subscribers in the UK than there are customers of traditional pay TV services. You may think this is a cord-cutting story but I'd suggest the biggest impact is going to be on TV advertising budgets.

First the research numbers, and although it's really close, it's a tipping point, nonetheless. The latest figures from Ofcom show that in Q1 there were 15.4m streaming subscribers, to services such as Netflix, Amazon and Now TV, compared to 15.1m for the likes of Sky. This has also had an impact on revenue. During 2017 Ofcom calculates streamers saw a 25% income increase to GBP2.3bn, while pay TV revenues fell 2.7% to GBP6.4bn.

That last figure is worth bearing in mind, though. Despite the streamers overtaking pay TV in subscriber numbers, their niche is still worth just a little more than a third of pay TV. It stands to reason that paying just underGBP10 for Netflix cannot seriously rival a Sky bill which can easily reach three or four times that value once kids, films and sports packages are thrown in.

There are a whole bunch of other statistics to go with the report but suffice it to say we're generally watching a little less traditional television and more online. That particularly applies to Gen Z and Millennials and, in contrast, is resisted by those of retirement age who are, as you would imagine, are still sticking it out with the traditional TV set and the country's main terrestrial channels. 

An interesting aside to this is that television production budgets are being cut by these main terrestrial channels because there is less TV watching to advertise against -- Ofcom cites a 7% year-on-year drop in TV advertising for 2017.

At the same time, we have Netflix and Amazon, particularly Netflix, trumping the main TV stations at what they do best, creating those "just one more episode" dramas that keep us all hooked. If you want to watch "Stranger Things," "Orange Is The New Black," "Breaking Bad" and "House of Cards," Netflix is the only game in town.

However, just as this tipping point looks to be a substantial seachange in media, along come disappointing Netflix subscription figures, which saw its share price drop as investors wondered whether the services stellar rise has peaked.

So, on the one hand, you have Brits signing up to subscription services in slightly higher numbers than traditional pay TV. On the other you have Netflix appearing to have peaked. It looks like there is cord-cutting going on but, then again, there are nearly as many people still paying for the likes of Sky, and they're paying nearly three times as much to do so. 

What can we take out of this? Well, undoubtedly the most interesting aspect is the UK's main terrestrial channels reinvigorating talks about a joined-up streaming service. The idea is to offer a catch-up and box-set-binging service through one screen rather than the several viewers currently have to search through to find a show. These talks have been going on under different guises for several years but I'd wager they will now bear fruit. The traditional channels have to flex their muscle and offer a one-stop shop to compete with Netflix and Amazon. The fact more are now streaming than paying for Sky underlines the point.  

For me, we have a tipping point but it's more one of cohabitation, rather than the new kids on the bock ousting Sky. The latter is the best resource for sports (with BT Sports added to your Sky package) and the latest cinema releases are always on Sky first. The range of documentaries and kids shows, as well as the everyday channels you'd expect, is simply second to none.

However, where this goes is going to be interesting. If an Amazon, Netflix or perhaps Facebook got serious about sports rights or cinema releases and managed to build a service to rival Sky, then all bets are off. At the moment, I think this is a new member of the family entering the house, it's cohabitation. People are paying for Sky and Netflix at the moment but it's one to watch.

Aside from the terrestrial channels banding together on a streaming service, the other big takeout for adland is that customers aren't currently so much cord-cutting as paying for two services. However, the direction of travel is supplementing traditional TV viewing with ad-free streaming. For an industry that is already seeing a strain on TV budgets strain, that can only mean more of the same to come.