Thursday, November 18, 2010

Cord Cutting? Cable Subscriptions Drop Again

Let's see the scorecard. For Q3, Comcast lost 275,000 cable TV subscribers, Time Warner Cable lost 155,000 subs, Charter lost 63,800, and Cablevision 24,500 subscribers. For both Time Warner and Comcast, each has seen basic sub losses for the last 6 quarters. back in Q1 2009, Time Warner added 36,000 customers while Comcast lost 78,000 subs. In fact,as far back as I have tracked, Q4 2008, Comcast has been losing basic customers, a total since then of almost one and a half million basic subscribers.

To be fair, not all these cable cord cutters are dropping cable TV service altogether; rather, most are switching to Satellite or Telco. Since Q4 2009, the "cable" companies have lost more than 2.7 mm subs, while Dish and Direct TV together have added more than 2mm and AT&T and Verizon have added over 3.75 mm TV customers. So while TV subscription is growing, the trend is moving from cable to alternative providers.

The other factor to consider is the level of service being purchased. As cable TV rates rise, customers are moving to satellite and telco for better deals. Customers are also dropping additional services like premium TV. HBO for instance has seen a significant drop in subscription. With VOD as well as over the top service like Netflix and Redbox, customers are choosing to buy individual films over a premium subscription. It is partly why these providers are pushing more original series to their audience. Exclusivity of content to maintain their audience share.

Lastly is over the top content providers. With Hulu pricing lower their premium level of service, price elasticity is at play to generate more customer buys. As Hulu becomes more robust at a manageable price point, pressure to drop cable service for broadband content will also impact cord cutting. Series through Hulu and other content sites and movies through Netflix and others, all at a at a reasonable price point, may cause consumers to reallocate their entertainment budget from cable subscription to elsewhere. And TV manufacturers and gaming console providers are making it far easier for consumers to connect broadband content to their TV set.

So the challenge of a bad economy, poor price-value proposition by the cable companies, cheaper alternatives, and over the top choices for content are negatively affecting the subscriber numbers for cable companies. The trends over the last 2 years should be enough for cable companies to realize that their dominance is at risk. Maybe not today, maybe not next year, but market forces continue to take bigger bites to eat away their market share.