Cable TV Subscriptions Drop – 'Cord Cutting' to Blame? Not Really
A new report shows that cable television companies lost 741,000 customers between July and September, representing the biggest quarterly drop ever since the media research firm SNL Kagan began compiling the statistics 30 years ago.
Media outlets, including the New York Times and tech blogs such as CrunchGear, have seized upon "cord cutting" – people watching shows on the cheap online via Netflix or on their computers via Hulu , for example – as the cause for the drop.
Yet rather than cutting the cord, a good number of people are in fact plugging it in: Over the same quarter that cable shed 741,000 subscribers, satellite and phone company television subscriptions went up by 145,000 and 476,000 respectively, almost cancelling out cable's losses, according to the SNL Kagan study.
"The way this is portrayed is being overhyped to some extent," said Mariam Rondeli, an analyst with SNL Kagan. "Cord cutting is a factor, but it doesn't appear to be the driving factor."
Rondeli said high unemployment is mostly to blame, and that accordingly "some households can't afford the $80 or $100 [per month] for a paid subscription," she said.
Bad news for cable
Overall, given the declines in cable, the "multichannel segment" – which includes cable and telecomm-delivered television channels – lost 119,000 customers in the third quarter, compared to a 346,000 gain in the third quarter of 2009.
That is bad news for the multichannel segment as it follows the first historic quarterly dip in the second quarter of this year, when 216,000 subscribers quit.
But before panic sets in, this is a market with 100 million subscribers, so losing 119,000 people represents a 0.1 percent loss – "a drop in the bucket," Rondeli said. Nevertheless, it is “a reversal in the trend we've seen in the past."
Rondeli added there is no data to suggest that "all 119,000 went to over-the-top substitution ," the industry term for delivery of content to a television not from a traditional cable, satellite or telecom box. (Content via a gaming console such as Nintendo Wii is an example of over-the-top substitution, but SNL Kagan does not include shows being watched on a computer in their data.)
Even so, the impact of over-the-top substitution "is becoming increasingly difficult to dismiss," said Ian Olgeirson, a senior analyst at SNL Kagan, in a prepared statement.
Some cable operators – but not all – have blamed cord cutting as part of the reason for their losses, Rondeli said, though in general the finger has been leveled at the still-weak economy.
Lower prices around the corner?
With back-to-back quarterly drops, cable companies are realizing that "people are having a hard time affording the tiers that the companies are offering," Rondeli said.
To try to lure back some customers, Time Warner Cable has just announced a trial budget plan in the Cleveland area offering 41 channels for $29.95, Rondeli said.
Cable is by far the largest of the three in the multichannel segment with a 60.3 percent market share (down from 62.9 percent in third quarter of last year), while satellite now has 33.2 percent and the telecoms 6.4 percent.
As for satellite's gains, Rondeli pointed out that DirecTV attracts and has a more affluent user base than its competitor the Dish Network and cable companies in general. "Affluent families are a little bit less affected by the economic turmoil than maybe families on the lower end," she said.