One Slightly Less Shitty Quarter For Cable Fuels Renewed Cord Cutting Denial

from the head-in-sand dept

Fri, Nov 6th 2015 6:16am — Karl Bode

First the cable and broadcast industry argued that cord cutting didn't exist. It was, to hear execs tell it, simply a reflection of the sagging housing market, and the people who were cutting the TV cord were poor, 40 year old nobodies, living in their mom's basement who didn't matter. Of course data has since shown that cord cutting continued as housing markets recovered, with millions of new home owners not signing up for cable. Similarly, most data shows that cord cutters are young, educated, and just tired as hell of constant rate hikes for mammoth bundles of awful reality TV programming.

After a record-setting second quarter for cord cutting, the cable industry seemed prepared to accept cord cutting (and as a result embrace new, skinny bundles of channels and the reality that it may actually have to someday compete on price). But subscriber TV losses during the third quarter sucked slightly less than normal. That, in turn, fueled a new industry press meme about how Internet video's threat to cable was "overblown," cable has "struck back" and it's time to "change the narrative," because cable, like, has things totally under control now:

"It’s time to change the narrative about cord cutting,” Craig Moffett, an analyst at MoffettNathanson LLC, said Thursday in a note titled “Charter Q3 Earnings: Cable Strikes Back.” “Yes, the pay-TV industry is slowly drip, drip, drip declining,” he said. “That cable was actually holding its own was at best a secondary narrative."...The third-quarter resurgence after a disastrous summer quarter of record subscriber losses was led by Comcast, the nation’s largest broadband Internet service provider."

So what did Comcast do to encourage this suddenly rosy outlook among many stock jocks? Why the country's least liked company lost just 48,000 subscribers last quarter. That's still notably pathetic, but it excited Wall Street because it was Comcast's best subscriber showing in nine years (which again, speaks volumes). Time Warner Cable saw similar "improvement," losing just 7,000 subscribers last quarter. Other third quarter earnings results were all over the board, from AT&T's loss of 92,000 U-Verse subscribers (great job!) to Charter managing to add a whopping 12,000 video subscribers (wow!).

And while this narrative of cable "striking back" and cord cutting being a hallucination of a few, mean 'ole bloggers is a great one for firms pushing specific stock positions, news outlets and analysts nervously sucking at the teat of dwindling industry ad money, or executives with their heads buried deeply in the sand, it misses the forest for the trees.

One, many of these companies just finished new gee-whiz set top box GUI upgrades (notably Charter, Time Warner Cable and Comcast). And while some graphical upgrades for the aging cable box may have excited customers temporarily, they're in no way going to be a substitute for the direction the cable industry absolutely needs to head: lower prices and more flexible channel packages. Netflix is now in half of all american homes and the impact on cable ratings has been abundantly obvious. And while several cable companies are finally experimenting with new "skinny" channel bundles, they're still not seriously competing on price. As a result these offerings tend to lack value, features, and, in cable industry fashion, are jam packed with fees and caveats.

A slightly less shitty quarter also doesn't change the fact that the housing market continues to grow without bringing new cable subscribers along for the ride. Nor do these numbers address the arguably bigger threat of "cord shavers," an admittedly idiotic term that includes users who are trimming back on their cable TV and service bundles to counter absurd programming rate hikes. Flat cord cutting numbers are just one metric to look at. Looking at all of the data, including ratings, housing growth, and cord shaving paints a very clear picture that Internet video is a serious threat that's not going away.

To be sure, much cord-cutting analysis and press coverage tends toward the apocalyptic, and over-states both the pace and scale of the problem. It's also true that cable could likely swat cord cutting like a pesky fly were the industry interested in things like actual innovation, competing on price, and disruptive new, open viewing platforms and hardware. But it's pretty abundantly clear looking at consumer bills and customer satisfaction surveys that the industry is interested in none of those things. Claims that one slightly-less-shitty quarter for a single statistic means the tide is turning sends the completely wrong message to an industry that needs to wake up and engage in aggressive adaptation before things get truly ugly.

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Filed Under: cable, cord cutting, craig moffett, denial, tv
Companies: charter, comcast, time warner cable

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That One Guy (profile), 6 Nov 2015 @ 5:54am

Ah denial...
It's like watching someone sinking in quicksand, who are completely in denial about it, as they point out that they only sank one inch over the last five minutes rather than two, and claim this is evidence that the whole 'sinking in quicksand' thing is a myth.

And all the while there's people standing on the edge, telling them to 'stop thrashing about', 'grab this branch', 'lay down on your back', telling them over and over what they need to do and stop doing, yet they ignore all of it, and insist that there's no such thing as quicksand, and even if there was, it's hardly a problem.
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Violynne (profile), 6 Nov 2015 @ 6:24am

A slightly less shitty quarter also doesn't change the fact that the housing market continues to grow without bringing new cable subscribers along for the ride.

This is expected, given how many new customers these companies want and they'll pretty much do anything to get them, such as actually giving new customers decent rates on internet without needing cable.

The problem comes after the initial promo period (usually a year). At this point, ISPs get downright nasty and up the promo price to ridiculous levels.

When customers call to complain, they're FORCED into taking tiered packaging because that's how the discounts continue.

Remarkably, the FTC says Net Neutrality changes by the FCC will hinder them to do their job.

So what the hell is the excuse for the last 30 years, where cable price gouging has exploded faster than the rate of inflation?

Just recently, we had to literally argue with AT&T to reduce their rate.

It was the final straw. I told my wife, against her wishes, this is the last year of cable, so get used to watching stuff online.
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Anonymous Coward, 6 Nov 2015 @ 6:56am

Cox cable raised my bill $40 within 5 months this year putting my cable bill up to $138 a month (with their whole home Contour DVR deal that never worked right after multiple service visits). I bought two Nexus Player stream boxes a few weeks ago, setup Kodi and Netflix, and it's been great. I don't miss cable at all. I still have analog cable free if I feel like watching it (never but my wife does) by just plugging the cable into the TV. I don't mind the $47 a month 50 down/25 up internet bill at all now.
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Anonymous Coward, 6 Nov 2015 @ 7:00am

Re: Ah denial...

And all the while there's people standing on the edge, telling them to 'stop thrashing about', 'grab this branch', 'lay down on your back'...

While I agree that a few people are doing that, I think most of us are dragging lawn chairs up to watch the show as we laugh and laugh and laugh...
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Anonymous Coward, 6 Nov 2015 @ 7:02am

"I don't miss cable at all"

"It's like watching someone sinking in quicksand"

"cord shaving paints a very clear picture that Internet video is a serious threat that's not going away"

One question I have for people that like to bash the cable industry, and that is "what is your point?"

Everyone knows that Internet video will become more and more popular. Doesn't take a genius to figure that out. Cable companies are just dumb pipe owners, does it really matter if you buy their crappy programming? Everyone gets their Internet service from cable companies, so you will pay them one way or another. Until there becomes a true choice to cable (and no, Fios isn't any different) you have no point.
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Anonymous Coward, 6 Nov 2015 @ 7:10am

Re:
An Extra $1600+ in my pocket over the next year is a huge point for me.
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jupiterkansas (profile), 6 Nov 2015 @ 7:32am

Re:
There's a huge difference. Cable companies aren't dumb pipes when it comes to content, because they're the ones paying for content. When cable companies actually become dumb internet pipes, the content creators will have to find another way to get their content paid for. Those internet fees don't pay for content.

If content creators can't make deals with Netflix or Hulu or find a way to offer their content online, they're dead. Good riddance because most of it is crap, but it's going to seriously upset the whole industry.

It will eventually destroy the power of cable companies, because whoever controls the content controls everything. Without that power, they won't be able to hold onto their monopoly power forever.
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PaulT (profile), 6 Nov 2015 @ 7:37am

Re:
"Until there becomes a true choice to cable (and no, Fios isn't any different) you have no point."

Erm, you kind of answered your own question there. People care because there is no real choice in many parts of the US, and so they can't vote with their wallet if they're stuck. If they're not stuck, these companies have been involved in things that affect us all, from the net neutrality debate to content availability on non-cable platforms. That's not even to mention the taxpayer money that gets fed to them.

While those who have escaped may be glad to be free, the actions of these companies still affect them indirectly, and so they take interest. Even if the interest takes the form of mocking them while they're sinking in the quicksand we tried to tell them was there a decade ago.
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mcinsand, 6 Nov 2015 @ 7:38am

even a constant number of subscribers would be a loss
When the pool of potential customers is growing, companies are losing even when their customer list stays constant. Even if they were losing no customers, that would still mean that they were losing market share. And, if their share is dropping, then some competing threat is growing.

If their investors are buying this story, then I hope that my 401k has none of their stock!
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Anonymous Coward, 6 Nov 2015 @ 7:39am

The cable companies are a one trick pony. Try to monopolize the market and scam the consumer.
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Anonymous Coward, 6 Nov 2015 @ 7:52am

Re:
Which is why it's important we do more to ensure a competitive market. But no, the government is allowing more and more mergers to take place. The govt is only now pretending to act consumer friendly so that they can get the public to be more approving of the mergers but their consumer friendly behavior will end once the corporations get their way. Isn't that how the FCC managed to take control of T.V. and broadcasting spectra? Back in the days anyone could broadcast to any frequency without a license. The FCC eventually started requiring licenses that anyone could get on some spectra, they expanded the spectra that require licenses for, but eventually they started limiting the number of licenses per spectra with the conditions that they will require a minimum amount of total competition to make the public more accepting of what is being stolen from us until now most of the broadcasting spectra is monopolized by a very few entities as those rules ensuring a minimum amount of competition kept getting more and more lax.

This is little different. Net neutrality, pro-consumer rules, all the while allowing more and more mergers (and small businesses are becoming less and less) until there are even fewer entities with even more control and then the government will start relaxing their anti-consumer position once the corporations that aspire to be monopolists have gotten their way.
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kallethen, 6 Nov 2015 @ 7:58am

Re: Re:
It will eventually destroy the power of cable companies, because whoever controls the content controls everything. Without that power, they won't be able to hold onto their monopoly power forever.

Only one problem: Most people only have one option for real broadband service, which is said cable company.

I've wanted to cut the cord. But my only broadband choice is the same cable company, their price for internet service without a package was high enough that I'd probably end up paying the same amount in total between internet, Netflix and Sling.
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Anonymous Coward, 6 Nov 2015 @ 8:11am

Re: Re:

If content creators can't make deals with Netflix or Hulu or find a way to offer their content online, they're dead. Good riddance because most of it is crap, but it's going to seriously upset the whole industry.

You do not get Youtube, Vimeo and the like which allows anyone to create distribute content that they have been created. There is no deal to be negotiated, and making money is an optional extra for many publishing via these channels. Also there is many an interesting conversation and a lot of transfer of knowledge going on over these channels. There are not enough hours in the day for a person to look at everything that interests them on these channels if they only put in a little effort of searching and following up the links given by the channels that they like.
The reason for people to publish content is as varied as the people who publish, as if their desire or need for income from publishing content.
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Anonymous Anonymous Coward, 6 Nov 2015 @ 8:13am

Who’s Reality
The reality in Reality TV will become apparent to their producers when they no longer have the support of cable bundling and have to compete for each and every viewer AND to get those viewers to cough up some money. Other than the filler used by cable companies to quantify, rather than qualify, their offerings, I don’t see much real in Reality TV, and it is this type of reality that cable companies use to delude themselves into believing they are still OK.
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jupiterkansas (profile), 6 Nov 2015 @ 9:12am

Re: Re: Re:
The content being created for cable is all by professionals who do it for a living and probably aren't going to do it for free on Youtube (assuming their audience wouldn't be large enough to generate a profit). I'm not going to cry over their lost jobs, though.
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jupiterkansas (profile), 6 Nov 2015 @ 9:16am

Re: Re: Re:
That's today's problem. It will change. It might take a decade or more, but it will change. Once they lose control of the content, they won't have the clout to maintain their monopoly power.
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Former Cable Guy, 6 Nov 2015 @ 10:06am

Hidden Costs
I used to work as a marketing executive at a cable company. One of the key drivers of annual price hikes and inflexible packages is content deals. Not saying the cable companies aren't greedy. They are. But half the increases are due to content holders raising their rates as much and as often as possible. They can get away with it because there are so few companies selling content nowadays. Blame Disney as much as Cox for your $100+ cable bill.
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Anonymous Coward, 6 Nov 2015 @ 10:07am

Re: Re: Re: Re:
The content being created for cable is all by professionals who do it for a living

From what I have seen, profesional is debatable. Much of it looks like it is being created by people put into a production company as a sinecure. I have seen better production values carried out by amateurs, as in the Star Trek continuations, and frequently on Youtube, carried out by two or three people.
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jupiterkansas (profile), 6 Nov 2015 @ 10:34am

Re: Re: Re: Re: Re:
I wasn't speaking to the production quality - but that the people involved are doing it for money.
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Anonymous Coward, 6 Nov 2015 @ 11:04am

"Claims that one slightly-less-shitty quarter for a single statistic means the tide is turning sends the completely wrong message to an industry that needs to wake up and engage in aggressive adaptation before things get truly ugly."

Shh... Don't tell them our plans for putting themselves out of business.
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Ninja (profile), 6 Nov 2015 @ 11:31am

Re: Hidden Costs
Which will be the demise of such content channels. I've been seeing more and more kids grow WITHOUT Disney. This is exactly what Disney doesn't want. But let's close our eyes and take stupidity up a notch.
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Dave, 6 Nov 2015 @ 1:51pm

On Demand
It's funny 'cause if the cable industry just made one change, and offered all programming on demand (netflix like), instead of in timeslots, even leaving ads in, they would probably be just fine. Even at the same price. After all they would have ALL TV CONTENT, ALL THE TIME. Something that the competitors don't have. They would, as you say, swat away the competition, at least for now.

The mere act of having to set up recordings for shows means that I NEVER get involved with new first seasons shows. I never know when they start, and by the time I hear they're good, it's like "ah well, I missed 5 episodes, so forget it, I'll binge watch something on Netflix instead."
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John Fenderson (profile), 7 Nov 2015 @ 6:30am

Re: Hidden Costs
"Blame Disney as much as Cox for your $100+ cable bill."

I think most everyone understands that the entire cabe industry is filled with greedy sociopathic assholes.
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John Fenderson (profile), 7 Nov 2015 @ 4:17pm

Re: On Demand
I dunno about at the same price point. The only thing more insane than the price of cable TV is what they charge for on demand.
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Whatever (profile), 7 Nov 2015 @ 7:50pm

Re:
"Everyone knows that Internet video will become more and more popular."

Here's the rub though: Most of the internet doesn't pay for the content to be created. Most of the "usual" sources depend on free content, "user uploaded" content, and outright piracy. Only a few services (like Netflix) have managed to bridge the gap and actually have an income stream that allows them to pay for content.

The longer term implication is always the same: The free lunch is great until there is nobody left to pay for it, then the buffet closes.

You may hate cable (Karl certainly does), but you have to understand in economic terms that it's a method by which the public pays for the content they enjoy. You pay cable, cable pays the channels, the channels buy the content... which is what you pay for, really.

Since it's unlikely that most people will want to pay a bunch of different subscriptions each month to get steaming this and online that, it's very likely that your cable company will at some point be replaced by your "online cable company" that will group together many channels and sources.

Remember, for the moment at least, it's really not economical or technically reasonable to move all of the OTA channels and cable channels to a streaming model. The internet can't handle it - it's already choking on Netflix.
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Anonymous Coward, 8 Nov 2015 @ 10:54am

Re: Re:
Most of the internet doesn't pay for the content to be created.

That is of little concern to many of the content creators, but is a major concern to those middlemen who make their money by controlling content created by other people. When your business is built on being the gate keeper to content distribution, it becomes difficult to compete with service orientated distribution channels like Youtube.

You pay cable, cable pays the channels, the channels buy the content... which is what you pay for, really.

More and more people look at that content and decide that it is not worth the cable fees. To a large part this problem is because cable sells bundles, and disconnects the content producers from the consumers. Because to most people, most of the channels are not worth the subscriptions fees, especially where there is only one or two O.K. channels in the mix. The result will be the death of the O.K. channels, dragged under by the pile of worthless channels bundled with them, unless they break free of the cable distribution system.

Remember, for the moment at least, it's really not economical or technically reasonable to move all of the OTA channels and cable channels to a streaming model. The internet can't handle it - it's already choking on Netflix.

As has been demonstrated here, and elsewhere, the problems with Netflix's distribution has been mainly the cable companies refusing to add to their switches or accept content delivery servers to deal with the distribution problem. That is most likely because they can see Netflix killing their cable business.
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jupiterkansas (profile), 8 Nov 2015 @ 12:46pm

Re: Re:
Broadcast television and radio has thrived for decades while offering their content free to the public. They're even able to compete against cable, despite having their content highly regulated and even censored by the government. In fact, their model is so successful that cable copied it and gave viewers commercials too, even though they are already paying for the content that should be commercial free. Cable companies could shut down tomorrow, and broadcasting will still thrive with their free offerings.

And if the internet is choking, it's only because of the monopoly cable companies hold on the internet are choking it. If they can offer all those channels via cable, they can offer them via internet too.
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PaulT (profile), 12 Nov 2015 @ 5:47am

Re: Re:
You know, if you're going to depend on easily disproved lies, you might as well make you telling of them convincing.

"The free lunch is great until there is nobody left to pay for it, then the buffet closes."

Then why do your beloved industries keep turn down the people wishing to pay? It seems strange to whine about pirate services then refuse to offer content legally in the same markets, don't you think? Especially since you're the only one trying to hint at pirate services while the rest of us are talking about legal licensing.

"The internet can't handle it - it's already choking on Netflix."

Yet, the reasons why are unfathomable to you even as they're widely discussed on the site you obsessively attack. Hint: it's not "the internet" or Netflix that won't play ball to handler it. There's no straight technical or economic reason why it can't.
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