Wednesday, November 13, 2013

Consumers Dropping Cable TV Service

It may be just a drip, drip, drip, but the high cost of cable TV, coupled with the rise of video content streaming on the web, may finally be turning consumers off cable TV completely.  Yes DirecTv and Dish both saw quarterly subscriber growth, likely due to the Time Warner Cable fiasco with CBS as well as to their cheaper offerings.  But a total number of subscribers have fled cable TV completely. 

"Veteran Wall Street media analysts Craig Moffett and Michael Nathanson calculated that the pay-TV industry — which includes cable, satellite and phone companies offering video service -- lost 113,000 subscribers during the third quarter."  Call it cord cutting but the reasoning behind this loss cuts much deeper.  It is the younger demo that no longer values cable and prefers to spend more time with web, social media, and gaming.  Should Q4 numbers show an increase in total customer drops, this cor cutting trend will hit hard.  Already cable operators are testing usage based broadband subscription packages.  Their intention, to recoup their revenues from high usage households dependent on streaming media platforms like Netflix, Amazon, and others.  And that usage, measured by recent reports, have been increasing rapidly.  Video streaming is dominating the broadband spectrum.  And so households that stick with cable operators for their broadband will see those fees rise faster and faster to make up for the loss in cable television revenues.

Consumers have little choice for broadband today.  Lower cost DSL service may find some relief and telco/wireless companies can provide packages of service that might just prove a better value.  But there is a need for more competition in this space.  When Time Warner Cable lost Q3 cable subs, they also lost Q3 broadband subscribers, a rare shift and one that portends more disaster for the cable operator. 

Broadband today continues to demand cheaper access and faster connection speeds.  Pipelines are easily clogged as high usage of heavy data video streams are requiring faster capital improvements.  But consumers will fight back if broadband usage fees rise dramatically.  Consumers are leaving cable for broadband and that trend will only quicken.