The Rate Of TV Cord Cutting Is Actually Worse Than You Think

from the the-miracle-of-competition dept

It's funny what a little added competition can do. It's no surprise that with the rise of streaming alternatives from AT&T (DirecTV Now), Dish (Sling TV), Google (YouTube TV) and Sony (Playstation Vue) -- last quarter saw one of the biggest cord cutting spikes on record. MoffettNathanson analyst Craig Moffett has noted that 2016's 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record. SNL Kagan agrees, noting that traditional pay TV providers lost around 1.9 million traditional cable subscribers. That was notably worse than the 1.1 million net subscriber loss seen last year.

The shift has finally forced a number of denial prone industry executives to admit things are changing, even if few want to adapt their products and services (read: lower prices) in order to weather the storm.

But while the simple metric of subscriber totals tells quite a tale, the story gets worse for traditional cable if you look a little deeper at the numbers. For example, Moffett has been one of the only analysts to emphasize how people who are moving or buying new homes aren't signing up for cable at their new location. Millennials moving out of their parents' houses aren't either. So while the pay TV sector lost around 762,000 customers during the first three months of the year, that total is actually higher if you include movers and home buyers:

"By Moffett’s estimates, if you include the people who should have signed up for pay TV when they moved into new homes, “nearly a million homes either cut the cord or chose not to take one in the first place in Q1.” The diagnosis: “Identifying the root cause of the acceleration in cord-cutting isn’t hard. It’s not demand (the demand has always been there). It is supply. Would-be cord-cutters and cord-nevers are finally being given options,” like Netflix, HBO Now and, to a lesser degree, those skinny bundles.

Many of these folks have been labeled "cord nevers," since they've never really subscribed to traditional cable -- and have no intention to. You may recall that originally, these folks were mocked as irrelevant by the cable industry (including by Moffett, who used to be a cord cutting skeptic). And many cable and broadcast executives quite incorrectly believed that once these younger viewers got married and settled down, they'd see the error of their ways and return to traditional cable. That's simply not happening.

And things really are only just starting to heat up. Amazon, Apple, and countless others are soon expected to throw their hats into the live TV streaming ring as well, ramping up what's been already quite heated competition among streaming video alternatives. And while the push to kill net neutrality (which in turn lets companies like Comcast use usage caps to punish users that leave the Comcast pasture) could pour some amount of cold water on this evolution, this trend isn't likely to be slowed down by much of anything.

And as we've long noted, it's really not too late for the cable industry to adapt. They simply need to lower prices and offer more flexible viewing options. But while the industry has paid lots of empty lip service to this concept, most cable companies continue to blindly pass on endless broadcaster rate hikes, resulting in obnoxious retransmission disputes and blacked out content -- only accelerating the rate of defections by disgusted subscribers.

Filed Under: cord cutting, tv

ESPN Axes Long-Standing Reporters, But Not The Execs That Failed To See Cord Cutting Coming

from the forest-for-the-trees dept

For years ESPN has been the perfect personification of the cable and broadcast industry's almost-comic denial regarding cord cutting and market evolution. Long propped up by a system that forces consumers to buy massive bundles of largely-unwatched channels, ESPN has struggled with the rise of streaming alternatives and sleeker, "skinny" channel bundles. The sports network, which has lost 10 million viewers in just the last few years, has been trying to argue that these losses (which caused Disney stock to lose $22 billion in value in just two days at one point) are simply part of some kind of overblown, mass hallucination.

Surveys have shown that 56% of consumers would drop ESPN in a heartbeat if it meant a reduction in the $8 per subscriber the channel is believed to cost. But last year, ESPN exec John Skipper suggested that these departing customers weren't worth keeping anyway:

"People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."

All is well! Nothing to see here! This narrative that cord cutters are somehow uneducated, too old, or otherwise not worth keeping (which isn't true) sits at the heart of cable and broadcast executive denial. And while execs like Skipper consistently insisted that everything was under control, former ESPN talent like Bill Simmons have noted that the cord cutting revolution came out of left field and surprised the hell out of the self-proclaimed worldwide leader in sports, which had spent years spending millions on SportsCenter set updates and licensing deals with nary a care in the world.

Instead of identifying market evolution and quickly adapting, ESPN did, instead, what any other legacy company would do. One, it began suing companies that tried to offer more innovative, disruptive cable TV packages that didn't include ESPN by default. Two, it began yelling at companies like Nielsen simply for showing company executives the truth: ESPN was losing subscribers at an alarming rate. In short, executives doubled down on bad behavior and denial, something fans had noticed for several years:

This week, some ESPN employees began paying the price. Including long-standing workhorse beat reporters like Ed Werder, who was among 100 on-air personalities and writers given pink slips this week.

In a memo posted to the ESPN website, Skipper proclaimed the staff reductions were necessary to "manage change" (something Skipper has shown himself incapable of doing while somehow remaining employed):

"A necessary component of managing change involves constantly evaluating how we best utilize all of our resources, and that sometimes involves difficult decisions...Dynamic change demands an increased focus on versatility and value, and as a result, we have been engaged in the challenging process of determining the talent—anchors, analysts, reporters, writers and those who handle play-by-play—necessary to meet those demands. We will implement changes in our talent lineup this week. A limited number of other positions will also be affected and a handful of new jobs will be posted to fill various needs."

That's great and all, but purging your on-air talent won't magically make executives like Skipper less myopic and more flexible. After losing an estimated 10,000 viewers per day, ESPN recently stated it will finally offer a standalone streaming service. But that won't solve ESPN's woes either. I'm told many of Disney/ESPN's contracts with cable providers contain provisions that prohibit cable providers from offering channel bundles without ESPN -- unless ESPN offers a standalone streaming service. In other words, even if ESPN adapts, it opens the door to new skinny, sport-free bundles without ESPN -- accelerating subscriber declines.

None of this is pretty, and were I a betting man I'd wonder if Disney/ESPN doesn't get swallowed up completely by a company like Verizon sometime in the next year. At that point you'd have to wonder if ESPN execs, like John Skipper (you know, the ones actually responsible for the channel's monumental implosion) might actually face something vaguely-resembling accountability.

Filed Under: business, cord cutting, predictions, sports
Companies: espn

Cord Cutting Is Very Real, And 25% Of Americans Won't Subscribe To Traditional Cable By Next Year

from the head-buried-firmly-in-the-sand dept

For years the traditional cable and broadcast industry has gone to great lengths to deny that cord cutting (getting rid of traditional cable TV) is real. First, we were told repeatedly that the phenomenon wasn't happening at all. Next, the industry acknowledged that sure -- a handful of people were ditching cable, but it didn't matter because the people doing so were losers living in their mom's basement. Then, we were told that cord cutting was real, but was only a minor phenomenon that would go away once Millennials started procreating.

Of course none of these talking points were true, but they helped cement a common belief among older cable and broadcast executives that the transformative shift to streaming video could be easily solved by doubling down on bad ideas. More price increases, more advertisements stuffed into each minute, more hubris, and more denial. Blindness to justify the milking of a dying cash cow instead of adapting.

But given the numbers we've seen over the last year or two, even the cable and broadcast industry has had to scale back its "head firmly in the sand" approach to market evolution. Last month MoffettNathanson analyst Craig Moffett, the telecom industry's top media quote machine, pointed out that 2016's 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record. Kagan agreed, a recent report indicating that Pay TV providers lost around 1.9 million subscribers last year, the firm predicting a notable spike in the number of broadband-only homes:

"At the same time, American broadband-only homes grew much faster in 2016 — increasing by more than 2 million. Kagan estimated the U.S. had 15.4 million non-multichannel broadband homes at the end of last year, up from 13.3 million end of 2015. That suggest that 13% of the country’s occupied households make the decision not to take a traditional multichannel TV package."

Another new report by Convergence Research predicts that this broadband-only trend will only continue:

"US TV subscriber losses and cord cutter/never household additions saw a major increase in 2016 as compared to 2015: We estimate 2016 saw a decline of 2.05 million US TV subscribers, 2015 saw a decline of 1.16 million, and forecast a decline of 2.11 million TV subscribers for 2017...As of YE2016 we estimate 27.2 million US households (22.3% of HHs) did not have a traditional TV subscription with a Cable, Satellite, or Telco TV access provider, up from 24.2 million (20% of HHs) YE2015, and we forecast 30.3 million (24.6% of HHs) YE2017. 2015 saw 2.1 million, 2016 3 million, and we forecast 3.1 million 2017 cord cutter/never household additions.

The shorter version: by next year, one quarter of Americans will no longer subscribe to traditional cable. And that's only going to accelerate as cheaper, better, streaming alternatives emerge.

In a functioning, healthy market, these companies would see the writing on the wall and adapt, benefiting users. And to be fair, some have tried (Dish's Sling TV, AT&T's DirecTV Now). But with the cable industry's growing monopoly over broadband, a return to rubber-stamp regulation, and the looming death of net neutrality, many of these companies correctly understand they won't have to seriously compete anytime soon. They can simply impose unnecessary usage caps and overage fees on uncompetitive broadband markets, then use zero rating to give their own services a leg up -- while penalizing competitors.

Unfortunately for them, even that likely won't "solve" the tectonic evolution that's only just starting to take place. Ultimately, denial-prone cable and broadcast executives will be left with just one, unthinkable option: actually competing on cable TV price, flexibility and quality.

Filed Under: cable, cord cutting, internet, trends, tv

USAToday Latest News Outlet To Completely Miss The Point Of Cord Cutting

from the if-I-buy-ALL-the-things-I-have-less-money...news-at-11 dept

So we've noted a few times now how every month or so there's a media report proclaiming that you can't save any money via cord cutting. The logic in these reports almost always goes something like this: "Once I got done signing up for every damn streaming video service under the sun, I found that I wasn't really saving much money over traditional cable."

Authors leaning on this lazy take almost always tend to forget a few things. One, the same people dictating cable TV rates dictate streaming video rates. Two, adding a dozen streaming services to exactly match your bloated, 300 channel cable subscription misses the entire point of cord cutting. The benefit of streaming is you can pick and choose the content you prefer. And yes, if you prefer a massive bundle of religious programming, horrible reality television, and infomercials, then yes -- you may want to stick to paying an arm and a leg for cable.

Just like clockwork, USAToday rushed to meet this month's invisible quota for "cord cutting doesn't save me money" stories. In their version, the author desperately tries to include the cost of broadband service just to try and make an inaccurate point:

"Sure, if we only pared ourselves down to free TV with an antenna and Netflix, then we’d be in great shape, at $10 a month.

I would argue that we'd also have to add in the high-speed Internet charge to watch the stuff, and that would add another $40-$50.

(Serious cord-cutters disagree with me on this—they say we'd all be paying for the Internet anyway, and the charge shouldn't be counted.)

Yeah, they're telling you that because they're right. Your broadband connection would be a cost whether you cut the cord or not. Now, ISPs use usage caps to exempt their own content while driving up the cost of using streaming services, but that would be the fault of cable companies (and a lack of competition in the broadband sector) -- not the fault of cord cutting or streaming services. In fact: how a lack of broadband competition allows this abuse of the last mile is actually a more worthy story for this type of -- regurgitation and repetition.

Undaunted, the USAToday author continues:

"In a debate Thursday on Facebook Live, Luke Bouma, the owner of Cordcutternews.com, argued that the average person who ditched their cable was saving $100 monthly on their bill. I don't disagree. But looking into the future, my point is, if you add many new streaming services, your bill could get just as high as cable.

On the entertainment front, is Netflix really enough? With Hulu, you get access to the latest network TV shows from NBC, ABC and Fox, for $12 monthly, without commercials. And many of us love the idea of HBO Now on-demand, with access to the entire library of HBO shows, from the Sopranos to Games of Thrones.

Add another $15 monthly for HBO.

So now we’re just at $90 a month. Which is about on par with what we currently pay for cable."

So yes, when you buy all the toys in the store window things do tend to get expensive. But when you actually bother to talk to real people you'll find that time and time again they'll tell you that cord cutting saved them considerable money from the $130 or so (more depending on fees and packages) most people pay for traditional cable. If their bill gets too high, cord cutters can always trim back a service or buy a service elsewhere (AT&T sells HBO streaming as part of DirecTV Now for $5). There's also piracy, which for some reason writers at major outlets like to refuse to admit is an option because it's naughty.

This kind of competition and choice flexibility puts the onus on you to find -- and get -- the better deal. That this kind of flexibility on price and options has long been lacking from traditional cable is the entire damn point. If you're missing that, you're not really understanding the cord cutting phenomenon at all.

Filed Under: broadband, cord cutting, savings, usatoday

The Cord Cutting The Cable Industry Says Isn't Happening, Keeps Happening

from the not-just-a-river-in-Egypt dept

For years, we've noted how many cable and broadcast executives have decided that their best reaction to the growing threat of cord cutting is to bury their head in the sand and pretend it isn't happening. Some industry executives like to insist that cord cutting remains an unimportant trend that will magically disappear once more Millennials begin procreating. Others -- often with help from the press -- like to insist the idea of cord cutting is some kind of myth perpetrated by mean bloggers, just to ruin everybody's good time.

As a result, too many in the cable and broadcast industry have decided that the best response to a changing TV marketplace is more of the same: more rate hikes, more advertisements, more tone deafness, and more denial.

You may be shocked to realize that this isn't working. In fact, MoffettNathanson analyst Craig Moffett, the telecom industry's top media quote machine, pointed out this week that 2016's 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record thus far:

"With the results now in from all of the largest operators, it is clear that cord-cutting of legacy distribution services—that is, without including OTT-delivered virtual MVPD bundles like Sling TV and DirecTV Now (and soon, YouTube TV)—has at last meaningfully accelerated,” Moffett said. “While there admittedly remain a few smaller operators left to report, the pay-TV business (as defined by traditional providers) ended 2016 shrinking at 1.7% per year, its fastest quarterly acceleration on record."

Companies like AT&T and DirecTV have "solved" the problem of cord cutting by rolling subscribers of their streaming TV services (DirecTV Now and Sling TV) into their TV subscriber totals, hoping you'll ignore that these users pay significantly less for service than their traditional TV counterparts. Other companies, like Comcast, have actually managed to eke out small quarterly gains in cable TV customers by leveraging their broadband monopoly and effectively giving TV services away on promotion -- a short-term fix.

But the train is rolling all the same. ESPN, the poster child of industry cord cutting denial, only just recently acknowledged it will finally crack and offer the kind of stand alone streaming services it spent years claiming weren't viable. The company's also gearing up for a new round of layoffs to help counter the millions of lost subscribers (due to cord cutting and the rise of pared-down "skinny bundles"). It's estimated that, at this juncture, ESPN's losing around 10,000 subscribers per day -- the lion's share of which are paying too much money for content they don't watch.

As always, you'll have a good idea that the era of cord cutting denial is over when cable providers truly begin competing on price when it comes to their traditional cable TV offerings. Right now, however, the overarching name of the game for the sector is to insist that this cataclysmic shift the industry is experiencing is just a temporary phenomenon that needs riding out -- and not, as the truth should make clear, genuine adaptation.

Filed Under: cable, cord cutting, internet, tv

ESPN On-Air Talent About To Care About The Cord-Cutters The Execs Aren't Concerned About

from the disconnect-over-the-disconnecters dept

It's been more than a bit perplexing to watch ESPN, sports television giant though it may be, shrug its shoulders at the cord-cutting trend that has refused to bend to the network's pleasure. With streaming being a thing, and that super-charging the cord-cutting revolution, we've made the point for some time that the sports broadcast industry was eventually going to feel the grip of fewer subscribers, as has been the case with much of the rest of the television medium. Yet ESPN barely reacted at all to cord-cutting, other than to insist that established ratings systems are crap and that its loss of millions of subscribers over the past few years was of no concern, mostly because those subscribers were poor. ESPN President John Skipper said just last year:

People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity.

Yet those comments came almost immediately after a huge round of layoffs at the network in 2015, trimming the behind-the-camera staff to what is essentially a skeleton crew. Still, stock prices stalled for Disney, with much of the blame being placed upon ESPN's subscriber loss. Some market experts have made some rather bold predictions that the subscriber woe for ESPN is over-hyped, even going so far as to predict massive market gains for Disney this year. That optimism seems to be largely built on the recent investment ESPN has made into digital distribution and streaming options. But if anyone out there is buying such optimism, the executives at ESPN do not seem to be among them.

Richard Deitsch at Sports Illustrated has a detailed write-up of ESPN's plans for its on-air talent in 2017 and it certainly looks like that talent is going to have reason for concern about cord-cutting that the executives lack.

SI has learned that ESPN will have significant cost-cutting over the next four months on its talent side (people in front of the camera or audio/digital screen). Multiple sources said ESPN has been tasked with paring tens of millions of staff salary from its payroll, including staffers many viewers and readers will recognize. Those with contracts coming up would be particularly vulnerable, sources said. The company is also expected to buyout some existing contracts, which is something rare for ESPN historically beyond a few NFL talents. The cuts are expected to be completed by June. Sources within ESPN say that there is no set list of names yet and stressed that behind-the-scenes people will likely (key word) not be impacted by these cuts.

Last month Reuters reported Disney had a lower-than-expected quarterly revenue, hurt by the drop in advertising revenue at ESPN. In addition, ESPN continues to shed subscribers at an enhanced rate, down to 88.4 million households in Dec. 2016. That number was 100.002 million in Feb. 2011.

It had to happen eventually. A network can't drop subscribers at rates in the double-digits without eventually taking a hit on the ad-revenue. Couple that with the sports licensing landscape in which partnering with teams and leagues has never been more expensive and it becomes difficult to see a way out this wilderness for ESPN. And, if this seems like a terrible trend for a business generally, it's particularly bad for a brand like ESPN, whose on-air talent has always been a key part of its success. The network likes to argue that it makes the talent popular and not the other way around, and it has some recent examples that demonstrate this to some degree, but the truth is that the talent and the network are more symbiotic than that. There's a reason why the retirement of Chris Berman, annoying slogan peddler though he may be, is such a big deal. He's been a titan for the network. Replacing that while cutting pay for the on-air talent is a unenviable task, to say the least.

And, just to be clear, this is mostly to do with cord-cutting and the numbers we're talking about are enormous.

The most immediate causes of the layoffs are clear. Over the last several years rights fees have skyrocketed, with ESPN now paying over $3.3 billion annually just to broadcast the NFL and NBA. Simultaneously, ESPN’s subscriber count and viewership—the fabled dual revenue stream that has made it the most envied television company in the country—have tumbled. While the loss of 12 million subscribers over five years is mostly due to generalized cord cutting, and not subscribers specifically dropping ESPN, it doesn’t really matter: It still amounts to losing almost a billion dollars annually. The status quo is unsustainable, and with rights fees already locked in for several years, salaries are one of the biggest areas available to cut expenses.

This how media giants die. Not quickly, or with mercy, but rather by being slowly bled to death by the reality of new times and un-adopted innovation. Sources from inside the company suggest ESPN execs weren't even discussing the cord-cutting trend until 2015. It seems that may prove to have been too late to right the ship in Bristol.

Filed Under: cord cutting, espn, layoffs
Companies: disney, espn

How Comcast's Growing Broadband Monopoly Is Helping It Temporarily Fend Off The TV Cord Cutting Threat

from the innovation-through-monopoly dept

Comcast's earnings report this week indicated that the company managed to add 80,000 basic video subscribers during the fourth quarter, and 161,000 net video customers for the full year. And while news outlets were quick to proclaim that Comcast had magically bucked the cord cutting trend, you'd be hard pressed to find a single outlet that could be bothered to actually explain how. When an explanation is given, it's usually just regurgitation of Comcast's claim that the cable giant's fending off cord cutting thanks to the company's incredible innovation in the set top box market:

"The turnaround in the cable business helped Comcast beat profit estimates for the fourth quarter. Executives attribute the momentum in their cable-TV business largely to their new video platform, called X1, which makes it easier to search for shows and movies on TV and on Netflix from their cable set-top box."

Except it's not cable box innovation that's helping Comcast fend off cord cutting, it's the company's growing monopoly over the broadband last mile.

In countless markets Comcast competes solely with AT&T and Verizon, who have made it abundantly clear they're no longer interested in the fixed-line residential broadband business. Both companies have made slinging ads and content at Millennials their primary focus, as evident by Verizon's acquisition of AOL and Yahoo and focus on creative new snoopvertising technologies. As a result, these telcos are quite literally trying to drive many of these customers away with a combination of apathy and price hikes. If these users want broadband connections any faster than 3-6 Mbps, their only option is, increasingly, Comcast.

When these users arrive at the nation's biggest cable giant, they discover that signing up for TV and broadband is notably cheaper than just signing up for broadband alone. The problem is: while many have claimed that Comcast's "bucking cord cutting," there's no evidence that many of these users are even watching the cable connections they pay for, nor that they'll stick around as a traditional television viewer long term. Many just signed up because having television was actually less expensive than getting rid of it.

But should they try and get rid of it Comcast's got that angle covered too: the company's growing monopoly means less broadband competition than ever in many of its markets, allowing it to impose draconian and unnecessary usage caps on the company's customers. Caps that apply to competing streaming services, but not Comcast's own content. All told, between bundling and usage caps, Comcast's broadband monopoly means it simply doesn't feel the pain a company would feel in the face of real competition, which is why it has little to no incentive to fix its historically bad customer service.

Often Comcast obfuscates its growing monopoly over broadband and its ham-fisted implementation of usage caps with creative claims of incredible new innovation that gets gobbled up by the press. Like the company's announcement this week that it will soon be letting customers watch Comcast cable TV on Roku devices. This new beta is Comcast's attempt to quiet criticism that emerged during the FCC's failed attempt to bring competition to the monopolized cable box. And, in obedient fashion, the press was quick to highlight the partnership as a surefire example of Comcast's incredible innovation.

But upon closer inspection the service comes with a number of caveats, including the fact that users must subscribe to Comcast cable TV and Comcast broadband, and must pay Comcast an extra fee just to use Roku hardware they already own. Also buried in the FAQ for Comcast's new Roku beta is the proclamation that this service also won't count against Comcast's usage caps:

"Will the XFINITY TV Beta app use data from my XFINITY Internet Data Usage Plan?

No. The XFINITY TV service delivered through the XFINITY TV Beta app is not an Internet service and does not touch or use the Internet. Rather, it is a Title VI cable service delivered solely over Comcast's private, managed cable network, so it will not count toward your XFINITY Internet Data Usage Plan. Usage of any other apps on Roku devices, including any TV Everywhere apps accessible with your XFINITY TV credentials, do use the Internet and will count against your XFINITY Internet Data Usage Plan.

Comcast is effectively arguing that this isn't a net neutrality violation (for whatever that's worth with the rules about to be deep sixed by a duopoly-adoring Congress) because the data doesn't travel over the common internet. Still, the function of these added restrictions cumulatively remains the same: to tilt the playing field and keep customers in house and away from competing services. With a growing cable monopoly and the rise of rubber-stamping regulators under Trump, Comcast will soon face less pressure than ever before to shore up its miserable customer service or to lower prices.

That's great news if you're a Comcast executive or investor, but less stellar if you're one of the countless millions of consumers or competitors already bored to tears by several decades of Comcast's anti-competitive behavior and overall dysfunction.

Filed Under: cable, cord cutting, monopoly, tv
Companies: comcast

Utterly Tone Deaf To Cord Cutting, Cable Contract Feuds And Blackouts Skyrocket

from the utterly-unsustainable dept

We've noted for years that as broadcasters and cable companies bicker over new programming contracts, already-annoyed customers are left in a lurch. Usually these feuds go something like this: a broadcaster demands a huge rate increase for the exact same content. The cable company balks, and the content is usually pulled out of the cable lineup. Customers aren't given any sort of refund for this missing content, they're just inundated with PR pitches from both sides trying to get them pissed at the other guy. Ultimately a new, confidential contract is struck, and the rate hikes are then passed on to the consumer.

In short, consumers are repeatedly punished with blackouts and petty PR bitching between companies incapable of responsibly signing new contracts, after which they get a lovely new price hike. It's no wonder that 2016 was a record year for cord cutting.

Utterly oblivious to the self-immolation that comes from pissing off an already historically unsatisfied customer base, cable providers and broadcasters are already doubling down on this dysfunction in 2017. In just the last few weeks, countless pay TV customers have lost access to content they're paying for, whether it's Bonneville International blocking Dish customer access to a local NBC affiliate in large parts of Idaho, DirecTV users temporarily losing access to 33 Hearst Stations, or Frontier customers losing access to Sinclair Broadcasting stations after the broadcaster demanded a 200% price hike.

The American Television Alliance, a coalition of mostly cable companies, was quick to point out that 2017 is on record to see more of these types of feuds than ever before, as broadcasters continue to push for rate hikes that neither consumers nor cable companies are willing to pay for. It's an utterly unsustainable business model to be sure, though the Alliance is quick to lay the lion's share of the blame, quite correctly, at the feet of broadcasters:

"Broadcasters ambushed innocent consumers on New Year’s Day with a tidal wave of television blackouts," said American Television Alliance national spokesman Trent Duffy. "Broadcast tycoons have brazenly and deliberately hijacked pay TV viewers once again, holding college football bowl games, the last weekend of the NFL’s regular season and network premiers for ransom in a naked ploy to extract more money from consumers."

Of course, cable providers aren't innocent little daisies either. While they may be a prisoner to broadcaster rates, they often impose rate hikes on service at every conceivable opportunity as well, whether it's higher fees to rent a cable box or digital signal converter, fees to pay your bill in person or via the phone, hidden obnoxious fees used to falsely advertise a lower price, or broadband usage caps and overage fees designed to seek out their pound of flesh from another area of the consumer wallet.

Again, this simply isn't sustainable. If the cable industry wants to seriously fight back against cord cutting and slimmer streaming alternatives, it needs to begin more seriously competing on channel bundle flexibility and price, something the sector as a whole appears to be incapable of realizing. As such, cord cutting and cord trimming (streamlining your cable package) are self-inflicted wounds from an industry so terrified of killing its precious legacy TV cash cow, it's actually accelerating the demise of its traditional customer base by doubling down on pissing them off.

Filed Under: blackouts, broadcasters, cable, contracts, cord cutting

Comcast Loses Just $5.50 Per Month When You Cut The Cord Thanks To Its Growing Broadband Monopoly

from the insulated-from-competitive-harm dept

We've noted several times that the cable industry is somewhat shielded from the rise of cord cutting because of its growing monopoly over broadband. You see, as AT&T and Verizon give up on unwanted DSL customers they don't want to upgrade (as part of a pivot into content and ads), there are now huge swaths of the country where users really only have one option for broadband above 25 Mbps: cable. Users fleeing neglected DSL lines sign up for cable, and because TV bundled with broadband is cheaper than broadband alone, users sign up for TV service they may not even want.

As this cable monopoly grows, these cable companies have less incentive than ever to compete on price across more than half of their footprint. And with ISPs literally writing state laws preventing public/private or community broadband, no market forces exist to prevent them from expanding the application of entirely unnecessary usage caps and overage fees. Most analyses overlook this, instead focusing on the scattered rise of Google Fiber and other gigabit deployments in highly-select areas.

One Wall Street analyst this week highlighted just how cushioned a company like Comcast really is when it comes to cord cutting. MoffettNathanson analyst Craig Moffett crunched the numbers and found that once you account for the higher costs you'll have to pay for buying broadband standalone, Comcast only really loses about $5.50 per month when a user cuts the TV cord:

"When a Comcast customer drops video, the MSO loses about $38 in contribution margin, Moffett estimates. But that customer ends up paying an extra $25 a month more for broadband when their bundling discount goes away. "Now, further suppose that half of those customers opt to upgrade to a higher speed tier at an average premium of $15 per month (implying a probability-weighted $7.50 benefit per cord-cutter)." The difference comes to $5.50.

Moffett's analysis isn't perfect and Comcast's losses are likely higher. He comes to that $5.50 number by assuming the departing customer upgrades to a faster speed, which really isn't necessary just for streaming Netflix. And it's not clear he's included the revenues Comcast makes on households paying rental fees for numerous cable boxes, or the fees Comcast hides below the line (like the broadcast TV fee). Still, the point remains that Comcast is arguably shielded from cord cutting because of the high prices it charges for broadband -- only made possible by limited broadband competition.

And Moffett doesn't even touch on the fact that Comcast can further recoup any cord cutting losses via usage caps and overage fees, something Moffett and other investors have long embraced given it lets an ISP charge significantly more money for the exact same service. Nor does Moffett highlight how Comcast further benefits by counting all competitor streaming traffic against the cap, while it's own streaming video service remains cap exempt.

All told, cable providers are now adding 99% of the quarterly net additions for new broadband subcribers each quarter, at the same time that the sector is consolidating at an incredible rate. And these companies continue to have almost comical control over state legislatures, often allowing them to literally write wish-list legislation further insulating them from competitive harm. And time and time again the industry, and the policy folks it employs en masse to pollute public discourse, intentionally conflate enabling this protectionist dysfunction as the "deregulation of free markets" (often with no penalty from an unskeptical press).

So yes, if you live in a major, relatively-affluent city or upscale broadband development your broadband options may be improving, if you're lucky. But across more than half of the country, users are actually seeing less broadband competition than ever before. And with Trump listening to telecom advisors that don't believe monopolies exist and are keen on gutting net neutrality and all regulatory oversight of said non-existing monopolies, you're potentially talking about millions of consumers looking at higher prices and worse customer service than ever before.

The solution, again, is fighting for better broadband on the local level. If you want better broadband, you need to get behind the push to eliminate protectionist state laws that restrict towns and cities from making local broadband infrastructure decisions for themselves. These laws, passed in roughly 20 states, not only prohibit towns and cities from building their own networks (even in cases where nobody else will), but they often hinder the kind of public/private partnerships that are becoming necessary to shore up competitive gaps caused by the broadband market failure the industry will tell you doesn't exist.

Filed Under: broadband, competition, cord cutting, craig moffett, monopoly, tv
Companies: comcast

Despite ESPN Whining, Nielsen Confirms Historic Subscriber Losses For Channel

from the not-just-a-river-in-Egypt dept

Last week, we noted how Disney and ESPN threw a bit of a hissy fit when Nielsen data indicated that ESPN had one of the biggest subscriber losses in company history last month. According to Nielsen's data, ESPN lost 621,000 homes in a single month, as well as losing 607,000 ESPN2 households and 674,000 ESPNU homes. That's of course on the heels of losing more than 7 million subscribers over the last three years or so, thanks largely due to the rise of cord cutting, cord trimming (scaling down your TV package) and the rise of some "skinny bundles" that exclude ESPN from the base channel lineup.

ESPN demanded that Nielsen withdraw its numbers, insisting they represented a "dramatic, unexplainable variation" that didn't match ESPN's own numbers. Nielsen obliged, but after conducting an "extensive" review of the numbers found them to be "accurate as originally released." Of course, this shouldn't be a surprise; we've noted how everybody but ESPN appears to have seen the writing on the wall. But instead of adapting to the changing times, ESPN responded by denying that cord cutting was real, and suing companies like Verizon for trying to bring some flexibility to the traditional cable bundle.

Not too surprisingly, ESPN's response in light of Nielsen confirming its numbers was to continue denying the very obvious fact that customers are tired of paying an arm and a leg for sports programming many of them simply don't watch. From an ESPN statement given to the media:

"This most recent snapshot from Nielsen is a historic anomaly for the industry and inconsistent with much more moderated trends observed by other respected third party analysts. It also does not measure DMVPDs and other new distributors and we hope to work with Nielsen to capture this growing market in future reports."

Except it's not an "anomaly" at all if you've been watching ESPN's subscriber base drop 2-4% per year right alongside dips in other broadcast ratings. Even sports, long believed to be the untouchable holy grail of television programming, has been suffering a notable decline as younger viewers look for cheaper, more flexible alternatives to the bloated cable bundle. ESPN's response to these challenges? Either outright denial or incorrect claims by company executive John Skinner that these departing customers are old, poor, and not worth keeping anyway.

ESPN is the biggest beneficiary of the old method of bloated, overpriced channel bundles, but like so many broadcast and cable companies, it's too terrified of prematurely harming the existing cable TV cash cow to try anything truly innovative. As a result, the company is seeing historic losses in subscribers, with apparently everybody but ESPN seeing that this adaptation (like a standalone streaming service) will need to come sooner rather than later.

Filed Under: cord cutting, espn, ratings, subscribers
Companies: disney, espn, nielsen