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'Mythical' Cord Cutters Make Their Presence Felt
As TV Industry Faces Worst Quarterly Subscriber Losses Ever
by Karl Bode 02:19PM Wednesday Aug 10 2011
The six largest publicly traded U.S. cable and satellite-TV providers combined to lose about 580,000 customers in the second quarter, the largest loss on record. While AT&T and Verizon still managed to add TV subscribers (202k and 184k respectively) thanks to new marketing efforts in recently-upgraded markets, eight of the nine largest subscription-TV providers in the U.S. lost a collective 195,700 subscribers according to Associated Press analysis. While cable TV operators losing basic cable subscribers is a trend that has been going on for a while, satellite TV and telcoTV have still managed to add subscribers. That changed this quarter with Dish and DirecTV losing customers for the first time -- to the tune of 109,000 combined.

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Traditionally executives have blamed this admitted trickle of defections on a sour economy and an awful housing market, insisting that "cord cutters" (or users who cut cable TV for Internet video) are fantastical creatures -- akin to unicorns, chupacabra, and yeti. But as operators continue to impose bi-annual rate hikes on struggling families, even those who've traditionally denied Internet video's impact appear to be softening their positions on whether Internet video is having an impact on the TV market.

Cable industry stock fluffer and Sanford Bernstein analyst Craig Moffett has led the charge in denying Internet video's impact on cable TV, first insisting the phenomenon wasn't real, then more recently stating that cord cutters were simply irrelevant 40 year olds living with their moms eating the video-equivalent of low-grade dog food. More recently however he's stated that constant cable rate hikes aren't sustainable, and now appears to be finally acknowledging Internet video is a viable lure to many if the cable industry persists on pushing their luck:
quote:
“Rising prices for pay TV, coupled with growing availability of lower-cost alternatives, add to a toxic mix at a time when disposable income isn't growing. For younger demographics, where in many cohorts unemployment is north of 30 percent, and especially for those with limited or no interest in sports, the pay-TV equation is almost inarguably getting less attractive.”
In the course of a year or two, Moffett has gone from insisting that cord cutters were an urban myth, to admitting there's a "perfect storm" brewing where rate-hike-weary users will be looking for cheaper options. One thing that Moffett has been right about (mostly thanks to wishful thinking) is the fact that as these losses grow, ISPs are going to start pushing harder on metering broadband (low caps, high per byte overages) in order to deliver investors the kind of growth they're used to. These price hikes aren't tied to any real cost of delivering service, but will simply be imposed to both cash in on -- and impede -- Internet video's growth.


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The geeks are cord cutting, not the common consumers

We are seeing a downturn, like we have over the course of the last couple years. At the same time though, this isn't surprising. The economy is in a down state. For the most part, people are looking at their bills and determining that they can't afford the $120 TV and internet bill anymore.

The common consumer may be moving to OTA or Netflix, but for the most part they are just cutting the cord to save money. Sure, most people can watch netflix on their Xbox360, but that is about as far as it goes for the common user.

The geeks who need the extra money, like the people here on BBR, are the only ones cutting the cord and moving entirely to their high speed internet connections. The geeks are able to find their TV shows in torrents or on file sharing sites. The geeks have their computers hooked to their HDTVs. The geeks know how to find live streams of sports to watch for free and can deal with the lower quality picture.

TV is a luxury item thats for sure. Hell, if I was unemployed, I would have ditched TV a long time ago. What you are seeing more than anything are people ditching TV because they can't afford it. As long as I can afford it, I will continue to pay for TV because it offers the best picture for live sports and TV. I can watch all my local sports programming in HD quality. The live sports online and online TV streams just don't cut it for me in terms of quality.

Until the common consumer can do what the geek can do, you will not see a lot of cord cutters that are doing it to get the content elsewhere. What you are seeing now is about 10k people doing it to get the content over the internet while the other 185,000 people are doing it to save money and not get the content at all.

To this day, there is still a division of knowledge when it comes to the internet. Geeks see the internet as a way to get anything done. For the common consumer, it has its uses but many people don't leverage that investment because they don't have the knowledge.
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