A few months back Google Fiber hit a major pause. It was laying off workers, putting its expansion projects in 11 areas under hold and even losing its CEO. It started with a hopeful outlook to revive the gigabit speed all over Kansas City. Google did not spell out how many people they laid off, but it is somewhere around 9%.
Cut to present: The once dominant player is now slipping back in the US broadband market. In the second half of 2016, they were able to add 15,000 subscribers. So they got over 84,000 subscribers last year. This made the annual growth rate come to 57.8%. But there was a sharp decline from the first part of the year when the growth rate was 66.2%. A year ago, the rate of increase was 78%. So we can see a trend forming here.
The US Copyright Office shows that the major increase in subscribers’ base is only in Kansas City. Kansas is the principal market of Google Fiber. Craig Moffett, the main analyst at MoffettNathanson, says, “Google Fiber added 19% fewer customers in Greater Kansas City over the past six months than they did over the semester prior, and their six-month growth rate in the region slowed from 27.4% to 17.4%.”
This is why after a few months of glory and five months of pulling back staff, Google Fiber only commands 0.1% of the cable market. Is this trend solely because of their inefficiency or has Google entered the market at the wrong time? According to Statista.com, the US market has shown a sharp decline in its Pay-TV subscription. There is going to be a significant drop in the pay-TV market by the end of 2020.
What has led to this decline?
There has been a pattern of viewers canceling their pay-TV subscription. We know that many of the households cancel the pay-TV subscription because of monetary issues. About 70% of Americans cut cords because they think that the cable TV is too expensive. 67% of the population thinks this is a good way to save expenses. Then there are 40% of the masses who think that online paid services are cheaper than cable TV.
Recently the streaming services have risen as a great alternative to conventional television. About half of the entire North America paid six to eleven dollars every month for their Hulu and Netflix subscription. So houses that have access to streaming are less likely pay for cable TV. This might have come back to haunt Google Fiber in unimaginable ways.
But Google Fiber focuses on broadband services
Moffett points out that slower growth in the pay-TV subscribers is alright, their main aim was to penetrate the broadband sector. He mentioned one does not necessarily point out towards the other. This is why Google has now found out the new YouTube TV OTT venture which will launch shortly. For now, we know that it is not a good sign that Google Fiber is moving back from its expansion and focusing on restricted goals for now. We need to watch carefully to see what happens next.