SNL Kagan: Pay TV posts first full year decline.

According to a recent  SNL Kagan press release 251,000 households became cord cutters between Q4 2012 and Q4  2013. This is the most relevant statistic, as it includes all three type of providers: Cable, Satellite and Telco.

Traditional Cable/MSO operators (Comcast, TWC etc)  are the biggest losers and Telco type providers (AT&T U-Verse, Verizon FIOS)  show the biggest gains. The total share of the market breaks down  as follows:

  • Cable      54.4 M
  • Satellite  34.3 M
  • Telco       10.7 M

Much of the debate on whether cord cutting is “real” or not comes from how these kind of statistics are interpreted. The churn factor – e.g. people jumping from TWC to U-Verse –  is irrelevant to that debate. AT&T has been aggressively  taking customers from Cable for years now. In my area AT&T offers a $49 package of TV and internet for 12 months, PLUS a $100 gift card. If you are paying over $100 per month  for Cable why not switch to save money? (I can think of one reason: AT&T customer service is the worst).

AT&T U-Verse intro offers creating churn. Photo mrbill flickr.

AT&T U-Verse intro offers creating churn. Photo mrbill flickr.

Taken as an aggregate, 250 thousand cord cutters represent only about  0.25 % of the total 100 million active Pay TV subscribers. An investor would probably call that performance “flat” , not a major loss. Or in other words, cord cutting  is real, but still just an early adopter phenomenon.

OK so cord cutting is real, but will the trend continue? That depends….

The churn numbers (people switching to cheaper introductory deals) are actually much larger  than the cord cutting  numbers. If Pay TV providers would offer a la carte  plus internet at a fixed  monthly price of under $50 per month I think the trend would reverse.  Of course Cable has been fighting the demand for a la carte forever so don’t hold your breath.

In the end today’s Cable prices are just too high relative to the value. Something will change. Stay tuned.

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14 Responses to SNL Kagan: Pay TV posts first full year decline.

  1. Augustine says:

    Looking at totals is misleading. I think that a better perspective is comparing the cord cutting numbers to the churn rate. I find out, and correct me if I’m wrong, that the churn rate 2.5%. In this case, 1 in 10 churning customers cut the cord or abandon the market. Even without considering the demographics, when cutting the cord is more prevalent among young adults, this is actually huge, if the numbers are correct, and perhaps spells the future decline of the market.

    • Greg says:

      Agreed. If younger people are becoming cord cutters or staying cord nevers that is a big problem for the industry.

  2. Len Mullen says:

    The important thing is that alternatives are becoming more viable with each passing day. On June 12, 2009, Roku, Apple TV, and Netflix Streaming were pretty unintimidating. Cable and satellite promos promised to idle antennas across the country. Cable’s biggest problem was satellite and bundling would take care of that.

    Fast forward just five years, and OTT is a crowded market, OTA is thriving, and Google plus Aereo theaten bundling.

    Premium providers have been sticking fingers in a crumbling dike for years and the industry is running out of fingers. In the process, they have alienated customers and partners.

    Instead of looking at who is cutting the cable, studies should focus on the health and viability of alternatives. There are limits to how much entertainment can be delivered over the internet. That limit is much higher for broadcast television. If this wireless delivery system can make enough money, cable is in trouble. Given the number of national syndicators and the health of the ‘broadcast first’ NFL, my intuition says cable is in trouble.

    • Greg says:

      Good points Len. However what do you mean by “broadcast first” NFL?

      • Len Mullen says:

        While the NBA, MLB, and NHL show most of their games on premium channels with some games available via free tv, the NFL has always offered almost all of their games on free TV. This year, the NFL has added Thursday games to their broadcast schedule. By making broadcast their primary means of distribution, the NFL has surpassed all other sports in popularity and profitability.

  3. Len Mullen says:

    this is why you cannot rely on OTT. Apple is seeking a relationship with Comcast that will give its customers a special ‘flow’ of date despite Comcast being bound (until 2018) by net neutrality rules agreed to as part of the nbc/universal purchase.

    If you use comcast internet, you are going to be at their mercy for media. Get an antenna.

  4. DesertStylite says:

    If the trend continues, maybe losing some money will get service providers attention. I also see younger people are increasingly foregoing cable/satellite completely, and as is true for almost every long-term trend, the younger consumers/voters/whatever represent the future.
    “If Pay TV providers would offer a la carte  plus internet at a fixed monthly price of under $50 per month I think the trend would reverse.”

    I have been paying $65 per month for TWC’S mediocre-at-best broadband internet. I paid my bill in person last week and asked about dropping my service down slightly to save money. The rep showed me I could keep my current service speed for only $40 per month or boost two tiers up to double my connection speed and pay $60 monthly, OR pay the same $65 I had been paying to receive the second-fastest speed offered in my area.
    This is the kind of opaque service and less-than-honest business practice that has given cable and broadband providers such a horrid reputation and such enormous profits (which almost never get reinvested to upgrade infrastructure).

    • Augustine says:

      When the promotional period ends, I started canceling the service one day and contracting it again on the next in order to get the promotional rate again.

      Yesterday evening I actually tried something different, since the promotional rates are better than a year ago. Bumping my speed would yield me same the promotional price as for new customers, which turned out to be the same as the price I got a year ago, but for faster service.

      And so I did online, just to get a message to call TW back, only to find out that the the promotional price hadn’t made it to my account, but the regular price for the faster service. After an hour on the phone and having been dropped twice, the promotional price for the faster service was confirmed in my account. Come a year, depending on the rates, I’ll consider again if it’s better to bump the speed or to drop service only to get it again the next day.

      Circumvention of such a sleazy scheme aside, shame on cable operators! Among cell phone carriers, it took T-mobile dropping their sleazy schemes forthright to shake up the competition. Given the nature of the cable infrastructure, I ‘m afraid that the operators are safe from a disruptive one that places customers in the forefront.

  5. Len Mullen says:

    Not entirely off topic, but I signed up for the Mohu Kickstarter yesterday. More out of support for the 5.1 stretch than genuine interest in the product, but I am curious. Anything that facilitates the integration of OTT and OTA is exciting to me.

  6. Greg says:

    Thanks for joining the conversation Desert! Providers charge what they can. The expense of building out cable and fiber is partially the reason why you don’t see many competing ISP’s in the same neighborhood. It’s doubtful that protected position will last forever. Look at what happened to the land line.

  7. Len Mullen says:

    I don’t think they even needed the $35k. In this case, I believe the KS was set up as a way to engage likely customers in the feature selection process. I signed up for the $89 package (I have plenty of antennas). Some things to like…

    – Anything Can Be a Channel
    – PSIP guide
    – USB/Network file playback
    – Time shifting
    – Google/Android apps

    Roku users are at the mercy of Brightscript programmers and the Channel Store monitors for content. Channels users will be able to bookmark web content.

    A PSIP guide means your hardware will work even if there is no internet or the guide provider walks away (as Rovi did for OTA).

    I hope the USB app is good, but I’m confident someone will write one if it isn’t.

    There is a google app to make my Simple DVRs a channel, so I’m not worried about DVR function, but the ability to pause for a phone call is nice.

    Assuming support for third party controllers, there are a lot of games in Google Play.

    • When will you get it? I really believe one killer app could take cord cutting into high gear. I like what Mohu said about some people not being comfortable with Roku or Apple TV. Simplify the interface to the point your mom will want one and it will take off.

  8. Len Mullen says:

    Estimated delivery: Jun 2014. I don’t really think the interface is the problem with either Apple or Roku. It’s the content and the difficulty of installation/configuration/maintenance.

    I’m not sure Mohu can fix that. Unless you are in a market where a small set top antenna will deliver broadcast programming, installing and pointing an antenna is more than most are up to these days. Same with OTT — my mother did not know her router password or wireless password when I showed up with a Roku.

    To your point, she did not like changing inputs and remote controls.

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