Friday, March 11, 2011

It's Not Cord Cutting, It's Cord Shaving

The concern that cable will lose subscribers entirely to alternative platforms is not necessarily true. Television remains the predominant way to enjoy video programming, especially long form while the pc and tablet are perhaps better suited for short form watching. That line is certainly blurry and based on when and where you are to watch, but the viewing preference is clear. And cable prefers that best connection to the TV set.

Still, the rising costs of the cable subscription is resulting in purchase behavior changes. Some are cutting the cord for internet only viewing; that number statistically is today very small. Others are seeking less expensive alternatives including switching providers from cable to telco or satellite who are able to provide a similar service for a lower cost; hence, a drop in basic cable subscriptions at the cable operator while these other providers grow. And lastly, the current cable subscribers, like me, who seek to downgrade their service to keep their costs from further escalating.

Some drop their hard line cable phone service (retaining their wireless phones) and others drop their programming tiers including premium services. "HBO and Cinemax, Time Warner Inc.'s (TWX) stable of premium cable networks, together lost about 1.6 million subscribers last year, while Netflix Inc. (NFLX) added nearly 8 million--a performance that was widely viewed as evidence that some consumers have an appetite for viewing movies and TV shows on broadband instead of pay-TV." This act of consumers dropping services and taking lower tier programming offerings is in essence "cord shaving".

Consumers have grown weary of paying so much for cable service and not seeing more return for their dollar. Costs are rising but value isn't. Dropping networks and programming tiers allow consumers to keep their cable subscription while using alternative platforms to appease their wants. So a Netflix subscription, costing far less than a monthly HBO subscription becomes a sufficient substitute. Cord cutting is most likely still of future concern for cable operators and programmers; but for today it is really about cord shaving.