CPTKILLER
Silver Member
After years of insisting that cord-cutting was neither significant nor worrisome, cable and satellite providers are facing the inevitable: The traditional TV business is now in free fall. In the last quarter alone, major TV providers lost a combined 1.1 million subscribers.
One might think that these companies would respond with lower prices and more flexible TV options. Instead, the opposite is happening: Theyæ±*e squeeze their remaining subscribers by cutting off promo deals and hiking prices. As a result, cord-cutting is starting to feel less like a choice and more like a necessity.
Fewer subscribers, higher prices
Charter Communications (which rebranded as Spectrum after acquiring Time Warner Cable and Bright House in 2016) offers the perfect example of how customers are feeling the pinch. Last quarter, Charter lost 36,000 residential pay-TV subscribers, yet the companyç—´ TV revenues increased by 3.4 percent. In the quarter before that, Charter lost 66,000 subscribers, but still squeezed out a 2.9-percent increase in TV revenues.
[ Further reading: The best over-the-air TV antennas for cord cutters ]
In both quarters, Charter said that 殿nnual rate adjustments and �romotional rolloff helped explain the revenue growth. In other words, people who previously signed up for cheap promo rates are now paying a lot more, and customers across the board are getting hit with price hikes.
Those increases aren稚 always obvious to customers, either. In November, Charter raised Spectrum痴 釘roadcast TV surcharge from $9 to $10 per month, increased cable box fees from $7 to $7.50 per month, hiked digital adapter fees from $5 to $6 per month, and reduced the discount for bundling TV with internet by $5 per month. Charter plans to tack another $2 per month onto its 釘roadcast TV fee in March, bringing the surcharge price to $12 per month. Spectrum痴 advertised pricing doesn稚 reflect most of those rate increases.
comcastcenter
Comcast
Cable companies such as Comcast are raising prices on their existing customers to make up for the ones theyæ±*e losing to the cord-cutting movement.
Charter isn稚 alone in squeezing TV holdouts for more revenue. In its most recent earnings statement, AlticeUSA reported flat year-over-year video revenue for its SuddenLink brand despite losing 31,800 TV subscribers. And while Altice痴 Optimum TV customers declined year-over-year by 3.2 percent, TV revenue only fell by 1.9 percent over the same period.
Other TV providers are now putting similar compensational price hikes in place. This year, Comcast is raising its regional sports fee by an average $1.50 per month, and its broadcast TV fee by $2 per month, Bloomberg reports, while DirecTV and Dish are both raising prices by $3 per month or more for all packages. DirecTV is also pulling back on the discounts it once offered to new subscribers as roughly two million customers reach the end of their two-year contracts, The Wall Street Journal reports, because thereç—´ little point in offering unprofitable promo deals if those customers end up leaving.
Cable and satellite TV providers aren稚 entirely to blame for this trend. The main reason theyæ±*e raising prices is because theyæ±*e being squeezed by TV networks, which themselves are seeking more money to make up for a shrinking subscriber base. Discoveryç—´ most recent earnings report, for instance, notes that 妬ncreases in contractual affiliate rates were offset by a decline in subscribers, while Disneyç—´ latest report notes that revenue growth for Disney Channels was é›»ue to contractual rate increases, partially offset by a decline in subscribers. Meanwhile, we致e seen Comcast force regional NBC sports into basic TV service from small cable providers, and ESPN demand higher prices even as ratings decline.
While TV network blackouts are on the rise as cable and satellite companies protest further price hikes, they always end the same way: The channels come back online, and customers end up with higher prices. With fewer people watching cable TV, the ones who stick around are expected to pick up the slack.
mvpds
Rich Greenfield / BTIG
The decline of the TV bundle. 溺VPD stands for æ�œultichannel video programming distributor, and ç*ºMVPD refers to ç*ºirtual or streaming versions such as Sling TV.
Forced out
Given that the average cost of TV service in the United States is around $100 per month, cutting the cord starts to look like a pretty attractive option. Even if youæ±*e just replacing a cable bundle with a live TV streaming service such as YouTube TV or PlayStation Vue, you could still potentially chop your TV bill in half. Unlike traditional cable or satellite TV, these services achieve lower prices by cutting out certain channels and not making customers rent expensive set-top boxes. They also subsist on slimmer or nonexistent profit margins while trying to build a larger audience for targeted ads. Because these services have lots of competitionå‚*oth from other live TV providers and from on-demand services such as Netflix葉he pressureç—´ on to keep prices low.
By comparison, traditional TV providers face a huge risk in diverging from the status quo. Just look at what痴 happening with DirecTV and Dish Network: Both companies dove headfirst into streaming with DirecTV Now and Sling TV respectively, yet those services aren稚 drawing enough subscribers to compensate for the hundreds of thousands of customers now fleeing satellite TV every quarter.
If youæ±*e a cable company, such as Comcast or Charter, itç—´ much easier to stay the course and extract maximum value from a steadily dwindling subscriber base, especially when the internet side of the business is more profitable and still growing. While cable companies have put forth some modest attempts at cheaper streaming packages, including Charterç—´ Spectrum TV Choice and Comcastç—´ Xfinity Instant TV, theyæ±*e generally not marketed toward existing TV customers, and theyæ±*e not especially appealing anyway. Spectrumç—´ streaming service, for instance, lacks DVR, and Comcastç—´ service quickly becomes pricier than other services if you want more than just local channels.
Clearly, the current model of inflicting higher prices on a shrinking subscriber base is not sustainable, but it痴 hard to see the traditional TV business�ncluding both cable providers and networks幼hanging their ways until they have nothing left to lose. I can稚 say exactly when that痴 going to happen. But if history痴 any guide, it値l probably be sooner than they expect.
Cut the cord, or else! | TechHive
One might think that these companies would respond with lower prices and more flexible TV options. Instead, the opposite is happening: Theyæ±*e squeeze their remaining subscribers by cutting off promo deals and hiking prices. As a result, cord-cutting is starting to feel less like a choice and more like a necessity.
Fewer subscribers, higher prices
Charter Communications (which rebranded as Spectrum after acquiring Time Warner Cable and Bright House in 2016) offers the perfect example of how customers are feeling the pinch. Last quarter, Charter lost 36,000 residential pay-TV subscribers, yet the companyç—´ TV revenues increased by 3.4 percent. In the quarter before that, Charter lost 66,000 subscribers, but still squeezed out a 2.9-percent increase in TV revenues.
[ Further reading: The best over-the-air TV antennas for cord cutters ]
In both quarters, Charter said that 殿nnual rate adjustments and �romotional rolloff helped explain the revenue growth. In other words, people who previously signed up for cheap promo rates are now paying a lot more, and customers across the board are getting hit with price hikes.
Those increases aren稚 always obvious to customers, either. In November, Charter raised Spectrum痴 釘roadcast TV surcharge from $9 to $10 per month, increased cable box fees from $7 to $7.50 per month, hiked digital adapter fees from $5 to $6 per month, and reduced the discount for bundling TV with internet by $5 per month. Charter plans to tack another $2 per month onto its 釘roadcast TV fee in March, bringing the surcharge price to $12 per month. Spectrum痴 advertised pricing doesn稚 reflect most of those rate increases.
comcastcenter
Comcast
Cable companies such as Comcast are raising prices on their existing customers to make up for the ones theyæ±*e losing to the cord-cutting movement.
Charter isn稚 alone in squeezing TV holdouts for more revenue. In its most recent earnings statement, AlticeUSA reported flat year-over-year video revenue for its SuddenLink brand despite losing 31,800 TV subscribers. And while Altice痴 Optimum TV customers declined year-over-year by 3.2 percent, TV revenue only fell by 1.9 percent over the same period.
Other TV providers are now putting similar compensational price hikes in place. This year, Comcast is raising its regional sports fee by an average $1.50 per month, and its broadcast TV fee by $2 per month, Bloomberg reports, while DirecTV and Dish are both raising prices by $3 per month or more for all packages. DirecTV is also pulling back on the discounts it once offered to new subscribers as roughly two million customers reach the end of their two-year contracts, The Wall Street Journal reports, because thereç—´ little point in offering unprofitable promo deals if those customers end up leaving.
Cable and satellite TV providers aren稚 entirely to blame for this trend. The main reason theyæ±*e raising prices is because theyæ±*e being squeezed by TV networks, which themselves are seeking more money to make up for a shrinking subscriber base. Discoveryç—´ most recent earnings report, for instance, notes that 妬ncreases in contractual affiliate rates were offset by a decline in subscribers, while Disneyç—´ latest report notes that revenue growth for Disney Channels was é›»ue to contractual rate increases, partially offset by a decline in subscribers. Meanwhile, we致e seen Comcast force regional NBC sports into basic TV service from small cable providers, and ESPN demand higher prices even as ratings decline.
While TV network blackouts are on the rise as cable and satellite companies protest further price hikes, they always end the same way: The channels come back online, and customers end up with higher prices. With fewer people watching cable TV, the ones who stick around are expected to pick up the slack.
mvpds
Rich Greenfield / BTIG
The decline of the TV bundle. 溺VPD stands for æ�œultichannel video programming distributor, and ç*ºMVPD refers to ç*ºirtual or streaming versions such as Sling TV.
Forced out
Given that the average cost of TV service in the United States is around $100 per month, cutting the cord starts to look like a pretty attractive option. Even if youæ±*e just replacing a cable bundle with a live TV streaming service such as YouTube TV or PlayStation Vue, you could still potentially chop your TV bill in half. Unlike traditional cable or satellite TV, these services achieve lower prices by cutting out certain channels and not making customers rent expensive set-top boxes. They also subsist on slimmer or nonexistent profit margins while trying to build a larger audience for targeted ads. Because these services have lots of competitionå‚*oth from other live TV providers and from on-demand services such as Netflix葉he pressureç—´ on to keep prices low.
By comparison, traditional TV providers face a huge risk in diverging from the status quo. Just look at what痴 happening with DirecTV and Dish Network: Both companies dove headfirst into streaming with DirecTV Now and Sling TV respectively, yet those services aren稚 drawing enough subscribers to compensate for the hundreds of thousands of customers now fleeing satellite TV every quarter.
If youæ±*e a cable company, such as Comcast or Charter, itç—´ much easier to stay the course and extract maximum value from a steadily dwindling subscriber base, especially when the internet side of the business is more profitable and still growing. While cable companies have put forth some modest attempts at cheaper streaming packages, including Charterç—´ Spectrum TV Choice and Comcastç—´ Xfinity Instant TV, theyæ±*e generally not marketed toward existing TV customers, and theyæ±*e not especially appealing anyway. Spectrumç—´ streaming service, for instance, lacks DVR, and Comcastç—´ service quickly becomes pricier than other services if you want more than just local channels.
Clearly, the current model of inflicting higher prices on a shrinking subscriber base is not sustainable, but it痴 hard to see the traditional TV business�ncluding both cable providers and networks幼hanging their ways until they have nothing left to lose. I can稚 say exactly when that痴 going to happen. But if history痴 any guide, it値l probably be sooner than they expect.
Cut the cord, or else! | TechHive
I thought it would be like an addict trying to kick heroin or something, but simply choosing to not watch it, I realized I didn't care at all.
