Once Again With Feeling: Cord Cutting Is Not A 'Myth'

Overhype

from the ignoring-the-bigger-picture-to-make-a-point dept

For years we’ve noted how the cable industry (and companies that feed off of it like Nielsen) have been in stark, often comic denial about the changes happening in the legacy cable sector. But every few months or so, a select rotation of news outlets also feel compelled to pooh pooh the entire notion of cord cutting, broadly declaring that the idea is a “myth” perpetuated by a select cadre of mean bloggers hellbent on confusing the public for some unfathomable reason. More often than not it’s the editors trotting out the “myth” headline to gain hits, despite the story itself doing a piss poor job actually debunking the concept.

One case in point is the Boston Globe, which recently proclaimed that because cord cutting is happening slowly in a country jam-packed with Luddites, the phenomenon at worst isn’t real, and at best isn’t important:

“The thin trickle of households that have dropped pay TV in recent years is barely enough to make a dent in the industry. Just under 100 million households have some form of pay TV according to Nielsen surveys, whether it comes via cable, satellite, or alternatives like Verizon Fios and AT&T U-Verse. That?s lower than it was a few years ago, when 105 million households had pay TV, but it?s hardly a revolution and there?s no sign of an accelerating trend.”

A five million user drop hardly constitutes a “myth,” but there’s another problem with that analysis: just looking at pay TV subscriber totals doesn’t tell the full story. One, several cable companies have started including their own $15-$40 standalone streaming service customers in with those totals, meaning the total tally of “pay TV subscribers” now includes — ironically — customers that have cut the cord. For example, Dish Network last quarter proclaimed it saw a net gain of 35,000 pay TV customers. But the company is now including its Sling TV streaming video customers in that total. Subtract those, and Dish actually lost an estimated 215,000 traditional TV customers.

Comcast has now quietly started doing something similar after launching its $15, creatively-named “Stream” service in several beta markets. And while yes, these are technically still “paying TV customers,” the difference is more than just semantics if you’re analyzing which customers still subscribe to traditional television — and paying upwards of $120 a month — and which customers have flocked to much, much cheaper standalone streaming platforms (still a rarity among cable companies that don’t want to cannibalize their own TV rolls like Dish appears willing to do).

The Globe continues:

“A separate survey by the Leichtman Research Group found that about 83 percent of households had pay TV subscriptions in 2015. That’s down from the 87 percent with pay TV in 2010, but actually higher than the 81 percent in 2005. Bottom line, pay TV remains a staple of the American diet.

Again though, just looking solely at total TV subscriptions doesn’t illustrate what’s actually happening. Another trick cable companies have used for years is to offer broadband and TV service bundled at a promotional price point significantly cheaper than just getting broadband alone. As a result, you’ve got millions of households that sign up for TV only because it’s the better deal. In many cases these users, especially Millennials, aren’t even using — and didn’t want — the traditional TV service they signed up for. And, given they’re on short-term promotions, it’s far from certain they’ll be sticking around. That’s a short-term “solution” that makes investors feel cozy looking at the raw numbers, but it doesn’t solve cable’s real problem, and it doesn’t somehow prove cord cutting isn’t real.

And now the newest trend is forcing customers to subscribe to legacy TV if they want to avoid usage caps, which is going to continue to prop up traditional TV subscriber tallies.

To really understand shifting viewing behaviors, analysts have to look at how many customers are actually using the TV subscriptions they’re signed up for. That’s why traditional subscriber totals have remained static or in slight decline, but broadcast and cable ratings have been in free fall. As ESPN has painfully realized, this is also thanks to “cord trimming,” or the act of reducing overall programming packages in an attempt to avoid relentless rate hikes — more common than severing the cord completely. None of this is mythical, just a little more complicated than claiming the cord cutting is akin to yeti and unicorn.

Analysts also tend to forget to factor in the fact that traditional cable TV subscriptions are either flat or in decline as the housing market recovers and grows. In short, that means millions of new houses and apartments aren’t signing up for traditional cable, something that’s also left out by just looking at subscriber rolls. Sanford C. Bernstein analyst Todd Juenger penned a research note this week pointing out that once people are faced with re-subscribing to cable after moving, many aren’t bothering. In many instances, people aren’t cutting the TV cord, they’re refusing to connect it in the first place. That’s especially true of Millennials heading out into the wild for the first time.

Like the Boston Globe, Techcrunch also recently penned a missive declaring cord cutting a “myth,” but like most other articles of this type failed to factor in the above details. It also makes a few odd logical leaps, like declaring that cord cutting isn’t a thing because consumers have “their own definition of TV”:

The story goes, “Cord-cutters are canceling their cable services and going over-the-top, therefore it’s the demise of the television business as we know it.” This premise is wrong. Here?s why: The consumer has their own definition of TV. To start, we should clarify that consumers now perceive ?TV? as content, not as content delivered through a linear hardware box in their living room. HBO, Netflix, Amazon, Hulu, Buzzfeed ? consumers don?t care about where content derives, they only care that it?s quality.

In short, Verizon-owned Techcrunch had to redefine television to try and make the point that “cord cutting” as a concept somehow isn’t real. But nobody is arguing that TV as a concept will die; it will just mutate. Traditional cable operators will eventually realize they need to compete on price, and they’ll ultimately adapt. Right now though, the name of the game is fiddling with subscriber TV totals to calm investors, while generating the illusion among consumers that they’re competing on price and flexibility. The result is so-called “skinny bundles” that are intentionally underwhelming and saddled with post-sale charges and fees, while the cable and broadcasters happily push bi-annual rate hikes on the majority of their legacy TV customers.

So no, the traditional cable industry isn’t “beating cord cutting,” it’s just fiddling with subscriber totals and forcing millions of customers to take TV service they may not want. And cord cutting isn’t a “myth,” many analysts just aren’t yet seeing the full picture.

The reality is that cord cutting is a very real, but very slow phenomenon. Slow in part because many TV subscribers are intimidated by new technology, something that will shift as these services get better and easier to use (and, to be blunt, old cable users die off). It’s also slow in part because broadcasters were afraid of killing the legacy cash cow and licensing their content to potential disruptors like Apple. But the flood gates are slowly opening, and 2016 and 2017 are slated to be packed with new, cheaper streaming TV options that should accelerate the trend to the point where denial will no longer be an option.

Claiming cord cutting is a manufactured fantasy certainly helps cable companies and the research firms making a living telling myopic cable executives precisely what they want to hear. And right now, what these executives want to hear is that cord cutting and cord trimming are just a small blip on the radar, easily conquered without seriously competing on price. These executives also want to be told that all of these problems will magically evaporate once Millennials start procreating. Once that happens, the theory goes, Millennials will suddenly realize that they really love traditional cable, high prices, and utterly atrocious customer service. So really, at the end of the day, who’s telling myths, exactly?

Filed Under: cord cutting, internet, myth, tv