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Summary:

There’s now even more evidence that subscribers are cutting the cord and opting out of paying for cable: By adding up subscriber losses from four of the top five cable companies, we found that more than half a million users have ditched their cable companies.

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There’s now even more evidence that subscribers are cutting the cord and opting out of paying for cable: By adding up subscriber losses from four of the top five cable companies, we found that more than half a million users have ditched their cable companies.

The carnage began last week when Comcast announced it had lost 275,000 basic cable subscribers, but it has continued as Time Warner Cable, Charter Communications and Cablevision have all reported major subscriber losses of their own.

No. 2 cable provider Time Warner Cable announced today that it shed 155,000 cable subscribers during the third quarter, which included 46,000 digital video subs. Yesterday, Charter Communications reported that it lost 63,800 basic cable subscribers during the previous quarter. And Cablevision said this morning that it shed 24,500 subscribers during the same period, including about 5,000 digital video subscribers.

Add that all together and you have more than 500,000 customers that left their cable providers last quarter, and that’s just data from four of the top five cable companies that have reported earnings. (No. 3 cable provider Cox Communications is privately held and therefore doesn’t have to announce its subscriber losses for all the world to see.) No doubt even more subscribers have left some of the smaller, non-public local and regional cable providers over the past few months.

Company 3Q Sub Losses
Comcast 275,000
Time Warner Cable 155,000
Charter 63,800
Cablevision 24,500
Total 518,300

So what can we make of this? Cable subscriber losses are obviously nothing new, and usually those losses are offset by subscriber gains at satellite and IPTV providers offering alternative pay TV services. In other words, Comcast and Time Warner Cable subscribers simply move on to become customers of Dish Network, DirecTV, Verizon or AT&T. And indeed, executives from Comcast, Time Warner Cable and others have pointed to a weak economy and increased competition as the main drivers behind their subscriber losses.

But a funny thing happened in the second quarter, when, for the first time ever, IPTV and satellite subscriber increases didn’t make up for cable losses. Cable providers lost a total of 711,000 subscribers in those three months, and 216,000 of those households did not sign up with other providers, deciding instead not to pay for multichannel video services at all.

That’s a trend we see continuing, particularly as cable subscribers continue to raise their bills at an incredible rate. Comcast reported on its earnings call that average revenue per user (ARPU) increased by 10 percent year-over-year, ending the third quarter at about $130 per month. Charter’s ARPU also rose about 9 percent, to $126. And while Cablevision’s reported average revenue per sub didn’t grow as fast as the others, it’s now a whopping $149.

All of which is why we think that the cord cutting phenomenon, which Comcast and Time Warner Cable deny is something that they’re seeing, is for real. From our point of view, expecting users to pay $125 to $150 a month, and continuing to raise those rates 5 to 10 percent every year, isn’t a sustainable business model. At some point, those users will find alternative, cheaper ways of getting the content they want, and now there are plenty of ways to do so.

For some tips on navigating life without cable, check out our new weekly video series, Cord Cutters, where we discuss the gadgets, tips and content available for those who have decided to do away with their expensive pay TV subscription.

Related content on GigaOM Pro: (subscription required)

  1. would be interesting story/data comparison to find out the subscriber loss during the last two recessions (82 and 01) in order to gauge how much subscriber loss is the economy versus alternatives.

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  2. We cut the cable after our bill continued to climb. More than happy now with an AT&T DSL dry loop for our Roku box (supplemented with free Hulu), digital OTA for PBS before school. While were planning to time-shift our current viewing, we’ve decided to to simply order a few of our favorite series on DVD post-season. We even discovered one of the broadcast TV stations has a 24-hour realtime weather and traffic. Turns out we miss cable a LOT less than we thought.

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    1. We too cut our charter service almost a year ago and have gone back to broadcast TV. We pick up about 20 high def channels off our 20yr old rooftop antennae with no need for a rotor. We get major networks (CBS,NBC,ABC,FOX) plus a host of PBS channels. Added an HD tuner to our computer for PVR capability. DSL and Netflix takes care of most everything else we might want. Like you, we really don’t miss cable – especially at the end of each month :)

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  3. Nuts… this means Internet prices from these same guys is going to rise to try and fill the hole of lost $$.

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    1. Couldn’t agree more. Like the prior commenter said – a data-only DSL line might be fine for a while to pick up the slack (telcos have a much smaller TV base to lose) for now, but the net result is still the same. Broadband providers will offset their lost content revenue with proportionately higher dumb-pipe fees. That’s the missing link for all of the “cut the cord” proponents. (No defender of Cable – but realistic).

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    2. the push to increase internet access fees will generate interesting discussion about the governments roll to keep the internet available. Several countries treat the internet as a public utility. I know the tea party would have a melt down but it would be an fun debate

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  4. It’s interesting – here in Texas there has been no inflation for nearly 3 years now, which lead my employer to not give cost of living increases during this time – yet my satellite bill (DirecTV) kept increasing. It hit $130 and we decided to cut the cord ourselves. It’s ridiculous that so much of our money should go to our “TV” bill… I’m much happier with Netflix + Hulu Plus + TIVO giving us a grand total of $35 or so…

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  5. For the sake of clarity, it’s worth noting that the 10% revenue/sub numbers they’re citing aren’t all because of price increases, they’re also because the number of services per subscriber is going up (i.e. more customers taking data and voice).

    For Time Warner Cable, for example, video revenue/sub is going to be up about 5% this year (with some of that due to more people taking DVR, HD, etc), while prices for data will be up about 2% (including more people taking higher data tiers), and telephony pricing _down_ about 2-3%.

    But, with the average customer now taking about 5% more services than last year, you get 9% growth in revenue per sub.

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    1. @Bob, you didn’t mention one key point, however, and that’s the very significant subscriber “service down-grader” trend.

      As an example, Time Warner reported that it expects to lose 1.5 million HBO pay-TV subscribers this year.

      Clearly, the whole picture isn’t apparent until you study all the related business model KPIs.

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      1. David, good point, and probably an underreported metric. Will look into a story on this sometime soon.

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  6. [...] subscribers jumped ship to the tune of 500,000+ last quarter, according to GigaOm, and for the first time in a while, GigaOm says other subscription “cable-like” [...]

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  7. An interesting point you make here, Ryan. To be clear to your readers, I am the director of digital communications at Time Warner Cable, so draw whatever conclusions you want from that.

    Adding up the lost subs from all the public cable companies and noting the discrepancies in satellite subscriber gains does tell a pretty compelling story. But I don’t doubt that cord- cutting is on the rise, I was one until about 1.5 years into my tenure at TWC. But for the premise in this post to be well-researched and truly accurate, you should really cross-reference the subscriber losses with foreclosure data from across all of “big cable’s” footprint. The housing market is continuing to implode like never before, and people are still moving in with one another, back home with their parents, and banks are still reclaiming houses. While it’s true that some folks are cutting the cord to save money, it’s also true that we can’t sell cable to an empty house. And there are a LOT of empty houses out there. I’d love to see what that relationship is in a followup post.

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    1. Jeff, Thanks for showing up and you make a fair point. I guess the bigger issue is just the assumption that pay TV subscription numbers will go up indefinitely. At over 100 million households, the market is pretty saturated already.

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      1. Ryan — no problem, man. Glad you appreciate the input. I think the larger issue is that of constant growth. At some point, we run out of households to subscribe to. All business try to grow constantly, right, but ultimately we are bound to the planet Earth and have to settle for selling to the finite number of people on it.

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    2. Appreciate you posting here. I also think the numbers don’t quite add up to the headline. Here’s one possible set of numbers:

      http://www.huffingtonpost.com/2010/04/26/number-of-vacant-homes-in_n_552274.html

      From the US Census numbers there were 19.023 Million vacant homes in the US in Q1’10 vs. 18.954 Million in Q1’09, so an increase of 69,000 vacant homes in a year.

      Of course the total pay TV market actually grew by about 862 thousand in this time frame using SNL Kagan’s numbers, so its probably not the time frame you’d want to look at. And I’m not sure where to find quarterly vacancy rates…

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  8. really good work ryan on this continuing cord-cutting subject/dynamic.

    as much as i support the future versus the past, i believe mr.simmermon of twc has a point worth researching somehow. however it sounds eerily similar to the corporate party line of it’s the bad economy, not our “f.u. customer” business practices, as wonderfully described above this post.

    haven’t paid for cable tv in 2 years, and haven’t replaced it with anything else either; wwaayyyyy outside the mainstream :).

    another aspect of this underway disruption for you and janko to focus on is the un-bundling scenario: no one cares which channel their favorite show comes from, as long as they can watch their favorite characters. and internet duistribution allows us this.

    i.e. as with songs/albums, shows/channels un-bundling will lead to a painful and vigorously protested disruption. isn;t that right mr. simmermon?

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  9. I was recently considering ordering cable service. But, when I looked over the channel listings, it struck me that they were incredibly bloated.

    I understand that cable companies need to make money. And, I understand that niche channels need to be subsidized by more popular ones, to an extent. But, it struck me as ridiculous that I’d have to buy upwards of 250 channels in order to get the 40-50 I’d actually watch.

    This low-value proposition might have flown back in the days when the cable company was the only game in town. But, that’s not the case anymore. I decided to get the bare bones package & rely on Netflix, hulu, Itunes etc. for the stuff not carried on the bare bones channels. It’s not a comprehensive solution yet. But, It’s working out PRETTY well.

    If the cable company wants more money from me, they’re simply going to have to offer more value. Ala Carte would be ideal. But, I’d settle for a “Top 100″ package.

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  10. @Robin, I don’t think Ryan can really make the point he thinks he’s making until he cross-references housing data with cable disconnects. Until then, it’s a gaping gap in his argument. I haven’t run the numbers yet myself, mind you. But it’s kind of a convenient conclusion/omission coming from a blog that has historically positioned itself as anti-cable.

    I do think that unbundling shows from channels and networks, and unbundling channels in general will be hotly protested. I know we’re against it, but I don’t think that customers will like it very much once they really think about what it means for them. This article sums it up pretty well, I think: http://www.nytimes.com/2007/11/24/business/media/24nocera.html

    While it’s true that internet distribution allows for more fragmented, niche distribution, content companies don’t make anywhere NEAR the amount of money on Web ads that they do on TV ads. And they’ve got to pay for the cost of production somehow. Shows like Mad Men aren’t going to get any cheaper to make, and the revenue’s got to come from somewhere.

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    1. I really appreciate you showing up to provide your thoughts on this matter, but I don’t think it’s fair to characterize this blog, or any other respectable tech blog, as “anti-cable.” I would argue that GigaOM, along with the tech industry in general, is simply pro-innovation (even if it means disrupting traditional businesses).

      There is a whole lot of subsidizing going on from a given content provider across their various channels/ shows, allowing for lots of sub-par content getting made in the hopes that it will resonate with some portion of customers; it amounts to affirmative action for content. It seems disingenuous to attempt to argue that broadcast technology is anywhere near as efficient as internet technology.

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