Industry Claims That Cord Cutting Would Be A Fad Aren't Looking So Hot

from the adapt-or-perish dept

Remember when the cable industry used to pretend that cord cutting wasn't real? Or perhaps you remember that once the industry was actually willing to admit it was a real trend, they'd claim it was only something being done by losers living in their parents' basement?

Or perhaps you'll remember the cable and broadcast industry claims that cord cutting was just a temporary phenomenon that would go away once the housing markets stabilized and Millennials started procreating? Or how companies like ESPN routinely claimed that warnings about the trend were an unimportant fiction that should be ignored?

Good times.

While there are still a few sector analysts and executives here and there who'll bizarrely try to downplay one of the biggest trends in TV industry history, the numbers keep making it harder and harder to keep one's head buried a foot below ground. Last year, for example, once again saw one of the highest defection rates of traditional TV subscribers in recent memory. According to Wall Street analysts, the top pay TV providers lost 2.5 million subscribers last year alone:

Ironically the two companies that actually tried to adapt to the cord cutting trend suffered the worst losses. Both AT&T and Dish have launched DirecTV Now and Sling TV, respectively, in a bid to try and at least hoover up a few of these fleeing customers with their own streaming services. That's something to be applauded, especially since huge swaths of the sector have simply responded by doubling down on terrible ideas (from raising rates to fighting against real cable box competition). But even with adaptation, users are still fleeing to other alternatives (Amazon, Hulu, Netflix) instead.

It's not going to be getting any easier for entrenched pay TV providers, especially the ones that stubbornly refuse to compete on price. The streaming market will soon face a new rival in the form of Apple's and Disney's new Disney+ streaming service, which will be the exclusive home of most Star Wars, Marvel, Pixar, and Disney children's' programming:

"The clear implication is that year-over-year subscriber trends for programmers that improved throughout 2018 are set to worsen again in 2019,” Greenfield wrote. The analyst is widely known as bearish on the pay-TV sector, frequently using the hashtag #goodluckbundle in his commentary (as he did in Wednesday’s post). The cord-cutting problem promises to grow even more exacerbated as new subscription-streaming services from Disney (Disney+), WarnerMedia and NBCUniversal hit the market starting later this year. Those will via for consumers’ entertainment dollars against SVOD players like Netflix, Hulu, and Amazon Prime Video."

So if companies like AT&T and Dish are actually trying to adapt to reality, why are they seeing such major departures? Many of these users were on unrealistically cheap discounted promotions intended to drive adoption that ended. And some users were frustrated by the a price hike by AT&T in the wake of its latest megamerger with Time Warner. New streaming companies are also actually good at customer service, something the cable and broadband industry hasn't been able to get a handle on for the better part of a generation.

Between tight margins and an ocean of new arrivals, it's going to be pretty hard for the cable industry to make anywhere near the same profits they were used to during the heyday of cable TV. But that's generally how competition works. And you shouldn't feel too badly for the Comcasts of the world, since their solution will simply be to jack up the cost of broadband, where competition is far weaker. Still, there's a subset of executives who still seem to somehow believe they're owed a permanent position of dominance without having to work for it. That delusion is falling apart more quickly than most of them expected.

Filed Under: cable, cord cutting, over the top, streaming

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  1. identicon
    Qwertygiy, 21 Feb 2019 @ 2:16pm

    Re: NOW for the fun part....

    According to the Wall Street Journal, cable providers pay just under $30 a month to networks for their basic packages. Over $8 of that goes to ESPN alone, while the median price per channel is just 14 cents.

    (paywall, but everything I just quoted is visible for free)

    The cable providers then turn around and charge, base cost, $60 to $80. They might offer you a discount if you bundle or for your first year, but even with those special offers, it's generally no lower than $45 per month. This also doesn't include any of those installation fees, cable box rental fees, and other fine print charges that they're known for adding.

    Now, let's see how various subscription services add up in comparison.

    CBS's streaming service: $6 a month. This includes all live content on CBS, CBS Sports, and The CW, as well as exclusive series, and on-demand for old TV series like MacGyver, Star Trek, CSI, and Cheers. This is the most comparable available option to directly "paying a network" for their content, rather than some form of aggregate.

    Hulu: $6 a month for on-demand. This includes movies and TV from ABC, A&E, Animal Planet, Brave, Cartoon Network, Discovery, Disney Channels, Food Network, Fox, Freeform, FX, HGTV, History, Oxygen, NBC, SyFy, TLC, TNT, Travel, Universal, and plenty of exclusive originals. While this doesn't include live content like sports and news, everything else is available on demand as soon as it finishes airing on TV.

    ESPN+: $5 a month for on-demand replays and original content, plus a lot of live sports that didn't make it to TV.

    Disney+: Not currently out, but expected to be below $10 a month for on-demand access to everything (that's below an MA or R rating) from Disney, ABC, and Freeform, including originals. Not expected to have live content.

    So it's reasonable to assume that to an end user, $6-$8 is a reasonable monthly price for a single network conglomerate's content, live and catalogued. Now, remember that almost every network out there that you don't already have to pay extra for belongs to one of these 10 groups...

    A&E: A&E, Crime & Investigation, FYI, History, Lifetime.

    AMC: AMC, IFC, WE tv, BBC America, SundanceTV.

    CBS: CBS, CBS News, The CW.

    Discovery: American Heroes, Animal Planet, Cooking, Destination America, Discovery, Discovery Family/The Hub, Food, DIY, Great American Country, HGTV, Investigation Discovery, Motor Trend, OWN, Science, TLC, Travel.

    Disney: ABC, ABC News, Disney Channel, Disney Junior, Disney XD, ESPN, Freeform, Fox, FX. Possibly an extra upgrade for ESPN Classic, ESPN U, and ESPN's various local sports networks.

    Fox Entertainment: Fox News, Fox Business, Fox Sports, various local sports networks.

    NBC: Bravo, CNBC, E!, MSNBC, Oxygen, NBC, NBC News, NBCSN, Syfy, Universal Kids, USA.

    Univision:Galavision, UniMas, Univision Deportes, Univision News, Univision Telenovas.

    Turner: Adult Swim, AT&T Sports Networks, Boomerang, Cartoon Network, CNN, TBS, TNT, TruTV.

    Viacom: BET, CMT, Comedy Central, MTV, Nickelodeon, Nick Jr./Noggin, Paramount, TV Land, VH1.

    Of the handful of channels left over, the exceptions are generally those already available over-the-air, like PBS, C-SPAN, QVC & HSN, or those that don't host any original content at all, such as MeTV (old CBS and Fox shows) or Music Choice (for obvious reasons).

    Now, I don't know about you, but I don't have any interest in 5 of those 10 groups, and only 2 of them matter to me to watch live. I'd gladly buy NBC and Fox equivalents to CBS All Access in replacement to cable, and spend under $15 instead of over $60. If I want to watch other content, I'm fine with rotating subscriptions the way I already do with Netflix, Hulu, and DC Universe.

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