Cable is losing subscribers. Publicly reported data from Comcast, the biggest cable operator in the US, shows the following:
Period Video Subs
change: – 1,134,000 ( -4.8%)
There is some debate about the cause and whether or not this will be a long term trend. But we think cord cutting will continue and here are the top five reasons we see:
1. Economic Cord Cutting
The current recession has been a long one and and the unemployment rate of 8.2% (March 2012) has had an impact. A monthly cable bill of $100+ is definitely one of the discretionary expenses that can be eliminated when times are tough.
2. Techy Cord Cutters
This is the second category of cord cutting. Do you enjoy the challenge of connecting an antenna, a Roku, a Boxee, and your PC all simultaneously while juggling 4 remotes? Not because your cheap but because you like the idea of circumventing the established methods. Well then your a techy cord cutter, a pioneer that is helping blaze the trail.
3. Cord Nevers
A cord never is just that: someone who has never paid for a TV subscription. This next generation may have come from a cable TV household but also grew up in an internet based video culture, preferring Hulu over television. An oft cited report by Credit Suisse analyst Stefan Anninger warns of pending doom for the industry due to cord nevers.
Netflix has certainly had the biggest impact on this movement. At $8.00 a month Netflix Instant streaming has provided an attractive alternative for those in the first two categories of cord cutters. Another model to watch is Aereo, currently available only in NYC for $12 month. Aereo is under legal attack, but if it survives long enough it might disrupt the current model.
5. The future and Disintermediation
Today’s current cable model consists of a dedicated path (coax and fiber) which connects your home to a satellite/antenna system at a master “headend”. But as broadband speeds and mobile (4G/LTE) improve that dedicated line can be circumvented by any content provider willing to sell you a package. That is already happening with Amazon, Hulu and Netflix. Comcast may sell you the high speed pipe, but you won’t need them for anything more than that. Or perhaps you will upgrade your Sprint phone to unlimited 4G and watch that way.
This disintermediation of the internet has had a profound effect on many business models, removing middlemen, from music distribution, travel and real estate just to name a few. It is only a matter of time before the dedicated line to your local multi-channel content provider is a thing of the past.