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Need more evidence that cable subscribers are cutting the cord? Look no further than Comcast’s (s CMCSA) latest earnings report, in which the nation’s top cable provider announced it lost 275,000 basic cable subs during the third quarter. Want to know why they’re switching off cable? Check out Comcast’s average revenue per user: $129.75, a 10 percent increase over the last year.
So Comcast’s cable bills increase and as a result, users jump ship to find cheaper forms of entertainment. It couldn’t really be that easy, could it? For some, it means finding an alternative service provider that operates in their neighborhoods — like Verizon (s VZ) or Dish Network (s DISH) — with a sweeter introductory rate for pay TV services. After all, there’s been plenty of IPTV and satellite substitution going on, as competition heats up and cable subscribers look for alternative providers.
While the company blamed the rough economy, the housing crunch and competitive pressures for much of the decline, Comcast said that a small number are unsubscribing from pay TV services and finding their content somewhere else completely. But Comcast Cable president Neil Smit hedged on the reason for customers unsubscribing, saying that based on exit interviews, those former customers aren’t turning to Netflix (s NFLX) or Hulu for their content, but instead turning to over-the-air signals — essentially plugging in digital rabbit ears — to access broadcast video content.
The drop in basic cable subscribers was much larger than consensus Wall Street estimates, as analysts expected Comcast to shed 189,000 subs during the quarter. Those dropping pay TV subscriptions weren’t just basic cable subscribers; according to Comcast, 60 percent of those cord cutters were higher-value customers. That’s worrying news for Comcast, and could be for the cable industry in general.
Worse news for Comcast and for consumers is the 10-percent jump in average revenue per consumer. Quite frankly, that kind of increase is not sustainable long-term, and Comcast — and cable companies in general — are going to have a hard time convincing their subscribers to stick around if they’re going to have their bills increased so dramatically year-after-year. Some of that price increase comes from customers paying for more value-added services, like DVR or digital TV, and some of it comes from Comcast churning off lower-value customers. But on the whole, pay TV bills have increased exponentially over the past several years, and they don’t seem to show any signs of slowing down.
While Comcast doesn’t yet see Netflix or Hulu as a threat to its business, the prospect of paying $10 a month or less as opposed to $130 a month is certainly an attractive proposition, and will continue to gain steam as cable prices continue to rise.
To learn more about how different users are cuttings the cord, what devices are available for watching content online and web video content that you might not already know about, check out our web series Cord Cutters below:
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