Despite 2015 being a banner year
statistically for cord cutting, you're going to see a renewed surge in cord cutting denial over the next few weeks. Why? Cable companies like Time Warner Cable and Comcast managed to eek out modest gains in pay TV subscribers in the fourth quarter.
Comcast's earnings indicate a net gain of 89,000
pay TV users in Q4, despite seeing a net loss of 36,000 video subscribers for the year. Despite still seeing a net loss, that's the best video performance the company has seen in eight years (which in and of itself speaks volumes). Time Warner Cable's earnings
(pdf) note the cable provider added 54,000 TV subscribers in the fourth quarter, while only seeing a net gain of 32,000 TV subscribers for the year. That's the best Time Warner Cable has done since 2006, and it's a stark improvement when each year's subscriber numbers are put in graphical form:
We'll ignore for a second these companies continue to see impressive subscriber and revenue growth thanks to network improvements, despite claiming Title II would destroy the known universe (that's a different blog post). But the fact that these companies finally saw a modest turnaround after years of steep video subscriber losses was quickly used as evidence by the cable industry, some investment websites
and a few analysts that cord cutting is "overblown":
Except these gains don't debunk cord cutting. Many of these additions are users that had previously fled to satellite TV and phone providers. For years, cable's subscriber losses were predominately to satellite and telco TV providers, whose set top boxes were notably more innovative (Dish's Hopper, for example). In the last few years Comcast and Time Warner Cable have dramatically bumped broadband speeds and updated their own set top boxes, moves that have won some former defectors back. As a result Verizon FiOS saw its worst
video subscriber additions since 2006, while AT&T and DirecTV combined
saw a 54,000 broadband user net loss and a net loss of 24,000 TV customers last quarter.
That's lateral subscriber movement between legacy pay TV providers, not evidence that cord cutting isn't real. And there's absolutely nothing in those numbers that suggests the very real trend of cord cutting has been "overblown" as a broader industry phenomenon.
There's another major reason cable companies are once again adding video subscribers: their growing monopoly over broadband markets. There are now hundreds of markets in which AT&T and Verizon (now focused almost solely on more profitable wireless) are actively trying to hang up on unwanted DSL customers via a one-two punch of price hikes and apathy
. Those annoyed users are being forced to flee to cable if they want current generation broadband speeds. When those users arrive, companies like Comcast and Time Warner Cable are offering them TV and broadband bundles that are cheaper than what they'd pay for broadband alone in order to boost legacy TV subscriber rolls.
As a result, many of these subscribers may not have even wanted TV, and once the promotional rate expires may decide to simply leave again. That's of course where Comcast hopes that the use of usage caps
comes in. The company is now exempting its own streaming service
from usage caps in the hopes of preventing TV users from cutting the cord. Should they cut the cord anyway and embrace streaming alternatives, they run face-first into usage caps and overage fees. If cable is forced to compete on price for TV, it will be sure to seek its pound of flesh from your broadband bill.
Cord cutting continues unabated in the background of this tussle, like the drip, drip, drip of a leaking faucet nobody wants to fix. And while pay TV growth remains flat or in decline, it's important to remember the overall population and the housing market continue to grow, without a corresponding uptick in cable subscribers. That's a sign that younger people and many new homeowners simply don't think traditional cable is all that important, and the slow drip of cord cutting will, over time, become something more resembling a torrent as, quite bluntly, legacy TV's older audience dies. Cable can do something about this, but it's going to require seriously competing on price above and beyond short-term, subscriber roll boosting promotions.