The Rate Of TV Cord Cutting Is Actually Worse Than You Think
from the the-miracle-of-competition dept
It’s funny what a little added competition can do. It’s no surprise that with the rise of streaming alternatives from AT&T (DirecTV Now), Dish (Sling TV), Google (YouTube TV) and Sony (Playstation Vue) — last quarter saw one of the biggest cord cutting spikes on record. MoffettNathanson analyst Craig Moffett has noted that 2016’s 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record. SNL Kagan agrees, noting that traditional pay TV providers lost around 1.9 million traditional cable subscribers. That was notably worse than the 1.1 million net subscriber loss seen last year.
The shift has finally forced a number of denial prone industry executives to admit things are changing, even if few want to adapt their products and services (read: lower prices) in order to weather the storm.
But while the simple metric of subscriber totals tells quite a tale, the story gets worse for traditional cable if you look a little deeper at the numbers. For example, Moffett has been one of the only analysts to emphasize how people who are moving or buying new homes aren’t signing up for cable at their new location. Millennials moving out of their parents’ houses aren’t either. So while the pay TV sector lost around 762,000 customers during the first three months of the year, that total is actually higher if you include movers and home buyers:
“By Moffett?s estimates, if you include the people who should have signed up for pay TV when they moved into new homes, ?nearly a million homes either cut the cord or chose not to take one in the first place in Q1.? The diagnosis: ?Identifying the root cause of the acceleration in cord-cutting isn?t hard. It?s not demand (the demand has always been there). It is supply. Would-be cord-cutters and cord-nevers are finally being given options,? like Netflix, HBO Now and, to a lesser degree, those skinny bundles.
Many of these folks have been labeled “cord nevers,” since they’ve never really subscribed to traditional cable — and have no intention to. You may recall that originally, these folks were mocked as irrelevant by the cable industry (including by Moffett, who used to be a cord cutting skeptic). And many cable and broadcast executives quite incorrectly believed that once these younger viewers got married and settled down, they’d see the error of their ways and return to traditional cable. That’s simply not happening.
And things really are only just starting to heat up. Amazon, Apple, and countless others are soon expected to throw their hats into the live TV streaming ring as well, ramping up what’s been already quite heated competition among streaming video alternatives. And while the push to kill net neutrality (which in turn lets companies like Comcast use usage caps to punish users that leave the Comcast pasture) could pour some amount of cold water on this evolution, this trend isn’t likely to be slowed down by much of anything.
And as we’ve long noted, it’s really not too late for the cable industry to adapt. They simply need to lower prices and offer more flexible viewing options. But while the industry has paid lots of empty lip service to this concept, most cable companies continue to blindly pass on endless broadcaster rate hikes, resulting in obnoxious retransmission disputes and blacked out content — only accelerating the rate of defections by disgusted subscribers.