80% Of Cord Cutters Leave Because Of High Cable TV Prices, But The Industry Still Refuses To Compete On Price

from the it's-not-a-problem-if-we-ignore-it,-right? dept

A new study from Tivo (pdf) notes that nearly half of current pay TV subscribers are considering cutting the cord this year. That's not particularly surprising given the fact that the first quarter set cord cutting records, and the second quarter is expected to be significantly worse. Similarly unsurprising is the fact that of these defecting customers, roughly 80% of those departing say they're doing so because traditional cable TV service is simply too expensive:

37.1% of respondents spent at least $101 per month on cable TV, with some spending upwards of $150 per month, with trends only aiming higher. While cable providers often pay ample lip service to "providing value," the entire cable and broadcast sector continues to believe that it can simply refuse to compete on price with a growing roster of streaming competitors now arriving at the gates of their beloved cash cow.

Case in point is Charter Communications, which after a recent acquisition spree has been raising TV rates upwards of 40% despite the supposed bump in competition. Charter CEO Tom Rutledge, who was deemed to be the highest paid executive in the United States last year at $98 million, has insisted that these customers were simply "mispriced" under previous ownership and needed to be nudged in the "right direction" (read: paying even more money for the same service they already thought was too expensive):

"It’s a difficult thing to model. But we’re coming at it both ways, both from creating a value proposition in the pricing and packaging we have, and doing those smart things that you can do with an existing customer base that’s been mispriced to move them in the right direction."

That's gibberish, and shockingly, this kind of tone deafness to the overall trajectory of the cable sector is only causing a spike in cable TV defections at the company, which lost more than 100,000 cable TV subscribers last quarter. Tivo makes it clear that the cable industry can't continue the ongoing head-in-the-sand approach to dealing with the rise of cord cutting and streaming competition:

When the increase in monthly bills is coupled with the fact that 81.4% of unsatisfied respondents selected “Too expensive/increase fees for cable/satellite service,” it becomes evident that something must be done about this group. With more options than ever for TV in 2017, consumers continue to get smarter about their TV options, and many have discovered ways to access TV for far less than $100 a month. Skinny buddle offerings have increased, too, and options include Dish Networks’ SlingTV, DIRECTV NOW and Sony’s PlayStation Vue.

Instead of competing on price and package flexibility, most large cable companies (like Comcast) have responded to cord cutting by not only raising TV rates, but ramping up deployment of arbitrary and unnecessary broadband usage caps and "overage fees", allowing them to counter any lost TV revenues with broadband price hikes, and punish folks looking to wander away from Comcast's own TV walled garden. But Charter is prohibited from using caps for another six years as a condition of its recent megamerger, conditions the FCC has started to slowly but surely nibble away at.

Still, the cable industry has at least progressed in one meaningful metric: a few years ago it denied any of this was happening whatsoever.

Filed Under: cable, cable tv, competition, cord cutting, fees, high prices, tv

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The First Word

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  1. icon
    MyNameHere (profile), 20 Jun 2017 @ 5:10am

    Re: Re: Re: Re: Re: Profitability changes as the market does

    Pretty much all of your post is wrong.

    "Which isn't true. They send posts from IPs that have been flagged as spam or trolling by the community here to a spam filter, which is then manually moderated."

    Not true. My ISP changes my IP reasonably often over a wide range of IPs (at least 3 different class As, and as a result there is a huge number of possible IPs). Since a post made immediately after an IP change heads directly to moderation, there is only one conclusion to draw. Clearly, it's not driven by flags. You aren't on the receiving end of this treatment, so you have no clue. Stop stating as fact what just isn't proven.

    "Neither are arbitrary price rises. More effective would be the changes to the packaging and other systems used by these companies which are both based in market realities from last century and reduce the value offered to customers who increasingly want bespoke choices."

    Not as simple as you make it sound. if changing packages around would lead to a drop in per subscriber income, or would encourage existing (and reasonably satisfied customers) to drop to a lower tier, you are shooting yourself in the foot.

    Cannibalizing your existing subscriber base to try to attract back a smaller group of lost clients may not be the best bottom line choice, that's all. It's a basic business concept that perhaps Mike can explain better for you one day.

    "you've avoided actually answering the points raised by the article"

    Nope, I addressed them very directly. The cable industry doesn't "Refuse(s) To Compete On Price" as the article suggests, rather they are unable to arrive at a business model under the current circumstances that is better than the current model - and that is my point entirely.

    I didn't figure you would miss it. Next time I try to draw with crayons so you can follow along.

    Oh, and calling me a liar? Just keep attacking Paul, it makes you look classy.

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