MONTEREY, Calif.—The content landscape is shifting, as the days of certain channels only being available on specific multichannel platforms are fading. This will factor into the accelerated long-term losses for multichannel services per media research group Kagan.

As more and more OTT services become available from different networks and studios, multichannel video subscriptions are losing the exclusivity of content that they previously held. This leads some consumers to drop the multichannel services in favor of OTT, causing the number of online-only households to rise.

Despite this, Kagan reports that the majority of households (64%) by 2023 will still rely on either traditional or virtual multichannel services for video entertainment. However, the arrow will likely be pointing downward overall.

Kagan forecasts that in 2023 the total traditional multichannel subscriptions will see a decrease of 16.4 million subscribers as well as a dip of traditional residential multichannel households of 15.6 million. Virtual multichannel households are expected to rise by 6.4 million to 13.5 million total, but the combined amount of subscribers for multichannel services is expected to be down overall to 84 million residential subscribers.

Meanwhile, alternative services like OTA is projected to see a rise of 3.8 million to 21 million total, while online-only households could see a bump of 10.6 million to 25.2 million total.

NEW YORK—The average household is paying nearly double in subscription costs to pay TV since 2000, representing an inflation-adjusted annual rate of 74 percent, according to Kagan.

When figuring in 2017 inflation adjusted dollars, legacy pay TV homes in 2000 were spending an average of $698.30 per year for multichannel service over telco, cable and satellite; by 2017, this figure had risen to $1,211.58, representing 3.3 percent CAGR. The real U.S. average income, in comparison, advance at a 0.3 percent CAGR, growing just 4.7 percent over the 17 year period, Kagan said.

The increases have not come without service enhancements, however, including a larger number of networks, and advanced services such as VOD, DVR services and improved user interfaces and resolution.

Kagan noted that multichannel revenue per subscriber “varies widely across the income spectrum.” In areas where the mean income was below $49,999, the multichannel penetration rate was 71.2 percent compared to a national average of approximately 74 percent as of Q4 2017. In areas where the average household incomes were more than $200K, penetration stood at nearly 83 percent, and in areas where average household incomes were between $50K and $100K, (the majority of households, at 73.5 percent of the total) penetration came in at 72.5 percent.

To add perspective on the impact that rising Pay-TV subscription rates have on household incomes, Kagan calculated U.S. multichannel purchasing power based on 2017 inflation-adjusted annual multichannel average revenue per user (ARPU) and average income figures, using 2000 as the base year. Based on this, Kagan developed an "affordability index" that illustrates the sharp decline in affordability, starting at 10 in 2000 and declining from then on, but relatively flat since 2012. 

Kagan blamed “the eroding multichannel affordability” partly to the growing popularity of OTT services such as Amazon Prime, Hulu and Netflix, as well as the emergence of “skinny bundles” from DISH and ATT’s DirecTV. 

Over the top access revenue topped $11.9 billion in 2017, a 41 percent increase over the prior year and is expected to maintain that momentum for the foreseeable future, according to a Convergence Research Group study, The Battle for the American Couch Potato: OTT, TV, Online.

According to Convergence, OTT revenue (based on 55 providers, led by Netflix) is expected to reach $16.6 billion in 2018, a 40 percent gain over 2017, and $25.6 billion in 2020.

At the same time, U.S. cable, satellite and telco TV access revenue grew just 1 percent in 2017, to $107.6 billion, and should slip in the coming years. Convergence estimates that traditional pay TV revenue should dip to $107.4 billion in 2018 and $106.9 billion by 2020.

Pay TV lost an estimated 3.66 million subscribers in 2017, up from 2.2 million in 2016, and should lose another 3.72 million in 2018, according to Convergence. The growth in OTT services – Convergence gathered data from about 55 different over-the-top providers for the study – is again the culprit.

[Read: Younger Viewers Gravitating To OTT TV Services: Study]

Convergence estimates 32.13 million US households, or 26.1 percent of homes, did not have a traditional TV subscription at the end of 2017, up from 27.56 million (22.6% of homes) in 2016. The researcher forecasts 36.76 million (29.6 percent of homes) will not have a “The gloves are off,” Convergence said in its report, adding that the industry is being transformed by deep-pocketed tech players like Amazon, Apple, Facebook and Netflix who appear to be willing to spend billions of dollars on original, licensed and sports content.

“We expect especially for the US market going forward fewer content deals between programmers and independent OTT providers: 2017 saw Disney choose not to renew with Netflix and embrace OTT, HBO not renew with Amazon in the US, Hulu (which is spending more on content on a per US subscriber basis than Amazon or Netflix) continue to bolster its offerings compete & more directly against TV access providers, and A+E, AMC, Discovery, Scripps, and Viacom back & supply Philo,” the report said.

Traditional pay TV providers have managed to keep revenue growing mainly through price increases, but that isn’t expected to last. Convergence estimates that TV access revenue will decline going forward. And programmers, who have relied on rising affiliate fees and advertising rates in the past are preparing for the new age of skinny bundles and lower monthly price points by going direct to consumer themselves.

“Programmers have read the writing on the wall and have already gone, or are in process of going direct to consumer, again at competitive price points,” according to the report.

At the same time, while cable continues to expert its dominance in the broadband arena, its growth is slowing too. Convergence estimates that about 2.33 million residential broadband subscribers were added in the U.S. in 2017 down from 2.66 million additions in 2016, while revenue rose 7 percent $56.8 million. Convergence estimates that broadband additions will grow slightly to 2.57 million in 2018, and revenue will rise 6 percent to $60.5 billion.

This article originally appeared in Broadcasting & Cable.