Google Fiber Gives Up On Traditional TV, And Won't Be The Last Company To Do So

from the adapt-or-perish dept

While Google Fiber was initially hailed as the be-all-end-all of broadband disruption, the bloom has come off the rose in recent months. Last fall, Google executives began to have doubts about the high cost and slow pace of the project, resulting in a not-yet cooked pivot to wireless and the departure of two CEOs in less than a year. Company PR reps seem unable to answer basic questions about cancelled installations and the unsteady direction of the project, which has also faced more than a few obstacles erected by incumbent ISPs unhappy about the added competition.

But Google Fiber has another problem: the slow but steady death of traditional television.

We've noted for some time how smaller cable companies are considering getting out of the pay TV business, since they lack the size and leverage to get the same rates enjoyed by sector behemoths like Comcast NBC Universal. Ultimately, you'll see many of these smaller cable companies shift their focus entirely to broadband, while nudging users toward over the top streaming services. As a smaller pay TV provider, Google is no exception, announcing last week that the company would be removing pay TV service from its service bundles moving forward:

"...We’re trying something new in our next two Fiber cities. When we begin serving customers in Louisville and San Antonio, we’ll focus on providing superfast Internet - and the endless content possibilities that creates - without the traditional TV add on. If you’ve been reading the business news lately, you know that more and more people are moving away from traditional methods of viewing television content. Customers today want to control what, where, when, and how they get content. They want to do it their way, and we want to help them.

That's a nice way of saying users weren't buying what Google Fiber was selling. The company doesn't reveal subscriber numbers, but while analysts have estimated Google Fiber's broadband subscriber count at somewhere between 500,000 and 1 million, the company's total pay TV subscriber count has long been relatively pathetic, with just 100,000 pay TV customers since the project's 2012 launch. Moving forward, Google Fiber makes it clear the company will stop fighting the current and nudge users to streaming alternatives instead:

Whether it’s through YouTube TV, Hulu, Netflix, or more specific targeted services -- there are so many ways to watch what you want, when you want it. And Google Fiber’s superfast Internet allows customers to make the most of all these streaming choices by providing the bandwidth to use multiple devices and apps at the same time.

What this means for Google Fiber's existing pay TV customers isn't clear, but it seems likely they'll ultimately lose service and be shoved toward discounted subscriptions for YouTube TV, Google's new live streaming video platform. But Google Fiber won't be the last pay TV provider to give up on traditional TV. We're entering a new era of mindless merger mania where we're intent on ignoring lessons of the past, making it increasingly difficult for smaller companies to gain a foothold in markets dominated by the likes of Comcast NBC Universal, or soon -- AT&T Time Warner.

And while Google Fiber hopes to have better luck focusing on broadband and streaming video, that's not an easy path either. These same TV sector giants (AT&T, Comcast) also have a growing stranglehold over streaming video licensing as well as the telecom market. And with the government gutting net neutrality and other protections beneficial to consumers and small businesses, getting a leg up in the broadband sector will soon be even more difficult than ever -- especially for those that lack Alphabet/Google's political power and healthy cash reserves.

Filed Under: broadband, competition, google fiber, tv
Companies: google

The Soaring Cost Of Sports Programming Is Simply Not Sustainable

from the something-has-to-give dept

One of the biggest reasons for soaring cable rates is the bloated and soaring cost of sports programming. Similarly, one of the biggest causes for the unprecedented rise in cord cutting (ditching cable and going with a streaming alternative) is the cost of sports programming. Surveys have shown that 56% of ESPN viewers would dump the channel just to save the $8 per month it costs each subscriber. Once streaming alternatives emerged for the sports-bloated traditional cable bundles that let them do just that, users began flooding to the exits at a historic rate.

The reality is millions upon millions of customers don't give a shit about sports, yet are forced to pay $120 or more per month for cable bundles filled with content they don't watch, and didn't want. And when some cable companies initially tried to offer "skinny bundles" without ESPN or other sports networks, they were sued by ESPN for trying to give consumers what they wanted. And while that has slowly started to change with the rise of live TV streaming alternatives, for traditional cable providers something in this cycle of dysfunction needs to change. Quickly.

Case in point: Axios points to Magna's latest Media Sports Report that highlights how cable companies are now paying significantly more money for sports programming than they make off advertising during the games. For example, cable operators now pay the NBA $2.6 billion annually in licensing fees, but "only" make $1.3 billion from the ads run during sports events. The associated graphic highlights how it's the same for most leagues:

Of course cable companies make up for the difference by not only imposing endless cable TV rate hikes, but via the bevy of misleading fees they've long used to jack up the advertised rate of service post sale. But their ability to do this has been dramatically compromised by the mass exodus of users fleeing traditional cable. And the problem is notably worse for broadcast networks:

This (sic) economics are especially problematic for broadcast networks that carry live sports games, because they don't have access to subscription revenues to subsidize the high cost of programming, like cable networks do. Broadcasters rely on ratings, driven by viewership — which is getting increasingly older and aging out of the coveted 25-54 marketing demographic, as well as retransmission fees.

As a result, more sports distribution rights have migrated to cable networks — think TNT and TBS carrying the NBA and MLB, respectively. But there are problems there, too. Cable channels are losing subscribers to digital streaming options at the fastest rate ever. It's worth noting that both cable and broadcast networks make a substantial amount of money from retransmission fees (charging cable and satellite providers to carry their content), but collectively it's still not enough to completely offset the rate of increases to programming costs.

The report proceeds to state the obvious by proclaiming that analysts "don't see the ever-increasing gap between ad revenues and rights fees as sustainable in the long term," something cable subscribers could have told them years ago. Wall Street analysts have similarly been discussing how retransmission fee hikes and the soaring cost of programming simply isn't sustainable for the better part of the last decade, not that it appears to have changed the landscape -- or the executive quest to milk the traditional cable TV cash cow to death -- in any meaningful fashion.

This will likely most harm small cable TV operators, who have said they may just stop selling cable TV as margins get tighter. Don't feel too badly for larger cable providers like Comcast, however. As their TV margins get squeezed, they are simply using their monopoly over broadband to jack up the cost of broadband via unnecessary and confusing caps or overage fees. The end result: cable companies get their pound of flesh one way or the other, as users are punished for fleeing the cable and broadcast sectors' walled gardens and the seemingly endless TV rate hikes therein.

Filed Under: cable rates, sports, sports programming, tv

Yet Another Report Says The Rate Of TV Cord Cutting Is Worse Than Anybody Thought

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

For years the traditional cable and broadcast industry has gone to comedic 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. Intentional blindness to justify the milking of a dying cash cow -- instead of adapting.

But we're slowly but surely reaching the point where the rise of the streaming video revolution can't be denied, with data indicating it's worse than anybody thought. While the pay TV sector lost another 1 million subscribers last quarter, those totals don't factor in those that bought a new home or rented a new apartment, but chose not to sign up for cable. Many of these folks are dubbed "cord nevers," having never bought into the value proposition of paying $130 more per month for a bloated bundle of largely-unwatched reality TV channels from a company that treats paying customers with disdain.

Meanwhile, a new report by eMarketer this week indicates that the pace of customer defections is notably higher than most previous estimates. The firm notes that it was forced to reduce its estimate for US TV ad spending due to faster-than-expected growth in cord-cutting:

"eMarketer expected a slowdown this year in TV ad sales, after 2016 benefited from both the Olympics and US presidential election,” said Monica Peart, eMarketer’s senior forecasting director. “However, traditional TV advertising is slowing even more than expected, as viewers switch their time and attention to the growing list of live streaming and over-the-top [OTT] platforms.”

All told, the firm predicts that by the end of this year, there will be 22.2 million consumers over the age of eighteen that have cut the cord, up 33.2% since 2016. And while there's still a whopping 196.3 million US adults that subscribe to traditional pay TV (cable, satellite, or telco), that tally is down 2.4% over 2016 levels, with the defection rate only accelerating. The cause? A strange idea known as competition and, by proxy, lower prices:

"The acceleration of cord-cutting is the result of several factors,” said eMarketer principal analyst Paul Verna. “First, traditional pay TV operators are increasingly developing streaming platforms, such as Dish Network’s Sling TV. Second, networks such as HBO and ESPN have launched standalone subscription services that allow users to tap those channels without a cable subscription. And third, digital players like Hulu and YouTube are now delivering live TV channels over the internet at reasonable prices—including sports properties that were previously available only through traditional distribution.”

As we've long noted, it wouldn't be particularly hard to nip this entire revolution in the bud. Entrenched cable providers simply have to shore up their abysmal customer service and lower rates for legacy TV. And while a few cable and broadcast executives are finally starting to get it, most would rather double down on lip service, bad ideas and price hikes in the false belief they get to nurse the dying cable cash cow in perpetuity.

Filed Under: cable, cord cutting, internet, tv

Disney Pulls Content From Netflix As Users Face An Annoying, Confusing Rise In Streaming Exclusivity Silos

from the drowning-in-monthly-fees dept

On one hand, the increasing number of independent streaming services is certainly a good thing. This increase in competition is finally starting to apply pressure on incumbent cable TV providers to offer greater programming flexibility and to compete on price, even though many cable and broadcast execs falsely believe they can ignore the threat and do the exact opposite. But as everybody and their mother jumps into the streaming game, we're facing a new threat: the rise of fractured exclusivity silos that make consumers hunt and peck to obtain their favorite programs.

Case in point: if you're a fan of a particular program in the modern streaming video age, you first need to check to see if that program or film is available on any of the half-dozen services you may subscribe to, be it Hulu, Netflix, Amazon, CBS All Access, YouTube TV, or any of a myriad of other options. That in and of itself can prove fatiguing on your patience -- and wallet if you're trying to save money over traditional cable. You've then got to see if that content is still actually available, since content licensing results in titles being added and removed in what are often illogical availability windows, adding another layer of confusion.

Now, things are poised to become even more complicated in that regard. Wanting to cut out the middleman, many broadcasters (like CBS, FX or AMC) are busy pursuing their own streaming services, pulling their content from existing available services and forcing users to sign up for yet another monthly subscription. For example, if you want to watch CBS's upcoming new Star Trek: Discovery TV show, your only option will be to sign up for CBS's $7 per month All Access service. Don't want or can't afford another service? Your option is to either go without -- or to pirate the program. Guess which option many choose?

A more recent case in point: Disney announced this week that the company would be pulling its content from Netflix in order to launch its own streaming video service:

CEO Bob Iger told CNBC's Julia Boorstin Disney had a "good relationship" with Netflix, but decided to exercise an option to move its content off the platform. Movies to be removed include Disney as well as Pixar's titles, according to Iger. Netflix said Disney movies will be available through the end of 2018 on its platform. Marvel TV shows will remain. The new platform will be the home for all Disney movies going forward, starting with the 2019 theatrical slate which includes "Toy Story 4," "Frozen 2," and the upcoming live-action "The Lion King." It will also be making a "significant investment" in exclusive movies and television series for the new platform.

On one hand, if you really like Disney content, this may not be a horrible thing for you. On the other hand, if you're only interested in a few Disney titles but already feel you pay for too many streaming services, you could find yourself annoyed. Users are, it goes without saying, cutting the TV cord because they're tired of the poor value proposition traditional cable TV represents. It's not entirely clear you can call it real pricing evolution if you replace one bloated, giant cable bill with an ocean of smaller charges that ultimately cost you the same if not more than your old cable TV subscription.

And while it's not entirely clear how many monthly fees and subscriptions users are willing to tolerate, it is abundantly clear that broadcasters and cable companies intend to push their luck and figure out the answer. Not many seem to realize that should they push too hard and cordon off content into an ocean of annoying exclusivity silos, the end result will drive users back to the simplicity of piracy. And that's a particular shame given all the work it took to wean consumers off of file trading services like BitTorrent and on to "legitimate" monthly streaming subscriptions in the first place.

There's a fine line here as we shift from traditional cable to over the top streaming, and it's precisely the kind of line the traditional cable and broadcast industry loves to trip face-first over.

Filed Under: content, movies, silos, streaming, tv, video
Companies: disney, netflix

Cable's New Brilliant Idea: Charging You More Money To Skip Ads

from the same-shit,-more-money dept

We've noted for years how cable executives facing market (r)evolution just can't stop making bone-headed decisions. As cord cutting accelerates and ratings take a dive, many cable and broadcast executives have decided the solution is to stuff more ads than ever into every viewing hour, in some instances actually editing down or speeding up programs so the additional ad load will fit. That's of course when they're not busy trying to prevent users from using modern technologies like DVR ad skipping, relentlessly raising cable rates and perpetuating some of the worst customer service in America.

Quite often, cable executives try to obscure the sector's dysfunction by pretending to be innovative, and hoping nobody can tell the difference. The latest case in point: FX Networks has struck a new deal with Comcast that lets viewers avoid ads on some FX programs -- if they're willing to pay another $6 per month:

"For an extra $5.99 a month, Comcast Xfinity customers will be able to receive the FX+ video-on-demand platform with up-to-date episodes of FX’s original programming, including “American Horror Story,” “Fargo,” “The Americans,” FXX’s “It’s Always Sunny in Philadelphia” and older FX titles such as “The Shield” and “Nip/Tuck.”

“This initiative represents the first of its kind for an ad-supported cable network, and begins to put us on equal footing with premium networks and streaming services,” John Landgraf, chief executive of FX Networks, said in a statement.

There's several problems with this "premium," Comcast-exclusive effort. One, users are incredibly fed up with paying too much money for bloated bundles of channels they don't want, and raising prices in any fashion at this juncture is simply a bad idea. Two, these Comcast customers can already skip advertisements on FX programming by using a DVR, making paying an additional fee to do the same thing uninspiring. There's also a notable caveat with this effort: the ad-skipping only works on some FX programs, namely the ones the channel hasn't already licensed out to other streaming competitors like Amazon, Hulu and Netflix.

AMC Networks offered a similar initiative last month, also letting Comcast customers pay even more money to do something they can already do. In some instances these are broadcaster efforts to set the stage for their own more fully-functional streaming services in line with Netflix or Amazon. But every channel from FX to AMC having their own streaming service presents its own problem: namely one of fractured exclusivity. Or, a world where you have to subscribe to a litany of multiple, costly services just to get access to your favorite programs.

On the surface these efforts are designed to give the impression that the cable and broadcast industry are rolling with the punches and adapting to the streaming video era. But the act of charging more money to do something users can already do, combined with raising rates at time when cord cutting is accelerating only really accomplishes one thing: drive users back to piracy where avoiding ever-growing ad loads can be avoided entirely, for free.

Filed Under: ad skipping, cable, fees, tv
Companies: comcast

Charter Spectrum 'Competes' With New $20 Streaming TV Service Featuring $6 In Entirely Bogus Fees

from the the-illusion-of-competition dept

You may have noticed that things aren't going particularly well for the traditional cable TV industry. Ratings for many channels are in free fall, the rate at which customers are cutting the traditional TV cord is accelerating, and the number and quality of competing streaming services is only growing. Cumulatively, this has forced many previously myopic cable and broadcast executives to stop denying the obvious and to candidly admit there's an actual market (r)evolution afoot, even if most of them still aren't quite exactly sure how to adapt to it.

And while the headlines are often filled with dire warnings about traditional cable TV being "doomed," that's not really true. Cable operators still lay claim to somewhere around 98 million paying customers. And keeping these users from fleeing to competing streaming services really isn't that complicated. These companies just don't want to do what's necessary. Namely, listen to their customers, offer more flexible and convenient services, shore up their atrocious customer service, and finally begin seriously competing on price.

Many traditional cable providers have responded by offering a new suite of so-called "skinny bundles" that profess to offer lower costs and to offer greater channel flexibility. But more often than not old habits die hard, and the industry often saddles these offerings with numerous murky restrictions, or layers of misleading fees. The end result is that these offers either aren't really competitive, or wind up costing nearly as much as traditional cable.

Case in point: Charter (Spectrum) is currently hyping a new $20 bundle of a few dozen channels they're testing in a handful of markets. Usually these trials exist to give the impression the cable company is being innovative, but are never launched nationwide for fear of mass-cannibalization of traditional customers downgrading from more expensive plans. But most news outlets were quick to lavish praise on Charter's new offering, many posting the ad for the $20 price point alongside their reports on the new service:

Except that "$20" isn't really $20, since the cable industry just can't let go of some bad habits.

Trial participants who actually have tried the service say it not only doesn't work all that well, but Charter has chosen to hide a number of obnoxious fees that dramatically jack up the price of the service. Of particular note is the fact that Charter saddles the offering with a $6 per month "broadcast TV fee." As we've noted previously, this increasingly-utilized fee simply takes some of the cost of programming and buries it below the line. Why? It lets the cable provider falsely advertise a lower price. And despite being false advertising, regulators from both parties traditionally haven't given much of a damn.

Some companies, like Comcast, have gone so far as to try and claim the broadcast TV fee is just their way of being transparent with consumers, since nothing quite says transparency like customers having no idea what a service they're buying will actually cost. But as the market floods with alternatives from the likes of Hulu, YouTube, Sling TV and more increases, cable and broadcast executives are eventually going to have to realize that the threshold for tolerating this kind of bullshit -- in the face of real competition -- isn't going to be quite at high as they're accustomed to.

Filed Under: cable tv, competition, cord cutting, fees, hidden fees, over the top, streaming, tv
Companies: charter, charter spectrum

AMC To Charge Cable Customers $5 More To Avoid Advertisements

from the look-mom,-we're-innovating! dept

We've discussed ad nauseum how, as the Internet video revolution accelerates, the cable and broadcast industry's response has predominantly been to double down on bad ideas in the false belief that they can nurse a dying cash cow indefinitely. Netflix nibbling away at your subscriber totals? Continue to glibly impose bi-annual rate hikes. Amazon Prime Video eroding your customer base? How about we edit programs to be shorter so more ads can be shoveled into every viewing hour? By and large, the cable industry's response to the cord cutting threat has been to do more of the things that forced annoyed consumers to leave.

And when you do see a cable or broadcaster attempting to be creative on this front, there's often a degree of lacking common sense. Case in point: AMC Networks last week fancied itself creative when it unveiled a new plan to let consumers skip advertisements on its programs -- if they're willing to pay an additional $5 per month:

"Would you like to pay more for cable TV than you’re already paying? Then AMC has an offer for you: The cable programmer is going to start selling an add-on service that lets cable TV subscribers watch most AMC shows, without commercials, for an extra $5 a month. AMC, which is rolling out its new “AMC Premiere” option to Comcast pay TV subscribers, says the new service is aimed at “super-fans” of its programs like “The Walking Dead,” who have a pay TV subscription but are willing to pay more to watch live, ad-free TV.

So, several problems here. One, the offer ignores the fact that many subscribers already skip ads using their DVRs, making this kind of unnecessary and insulting to the savvy consumer. AMC's also ignoring the lessons learned about needing to compete with piracy, something that doesn't stop being true just because you're offended by piracy's existence. And with often bi-annual price hikes already driving consumers away from cable at a record rate, you'd be pretty hard pressed to find any consumer that thinks it makes sense to pay a penny more for cable television at this juncture, something the company seems fleetingly aware of:

"It’s not for everyone," said AMC president Charlie Collier. "But it’s a good choice for people who want it."

Is it really? This is, once again, the cable and broadcast industry attempting to look innovative and competitive without having to put the time and money into actually being innovative or offering lower prices. AMC "solves" a heavier ad-load problem that consumers have already managed to avoid with their DVRs, hikes up the price of expensive cable TV service even further, then pats itself on the back under the pretense that this is delivering added value to "super fans."

If the cable and broadcast industry really wanted to be innovative, it would work to respond to the rise in streaming competitors and actually compete on price and channel bundle flexibility. Until it does that, everything else is hollow lip service.

Filed Under: ads, fees, tv
Companies: amc

AT&T Claims Forced Arbitration Isn't Forced... Because You Can Choose Not To Have Broadband

from the heads-I-win,-tails-you-lose dept

For years, AT&T worked tirelessly to erode its customers' legal rights, using mouse print in its terms of service preventing consumers from participating in lawsuits against the company. Instead, customers were forced into binding arbitration, where arbitrators employed by the companies under fire unsurprisingly rule in their employer's favor a huge percentage of the time. Initially, the lower courts derided this anti-consumer behavior for what it was, critics highlighting that however brutally-flawed the class action system can be, binding arbitration in many ways made things worse.

But these lower court roadblocks quickly evaporated when the Supreme Court ruled in 2011 (Mobility v. Concepcion) that what AT&T was doing was perfectly OK. While lower courts saw this as an "unconscionable" abuse of consumer rights and the law, the Supreme Court bought into the ongoing myth that binding arbitration is a hyper-efficient, modern alternative to class actions. The Supreme Court reiterated its position in 2015, and now, thanks to AT&T, most companies employ similar language in their terms of service fine print.

This year, CBS News launched an investigation into AT&T and DirecTV's business practices and found a huge number of customers that were being systematically over-charged by the company, facing significantly higher rates after they'd signed up for what they thought would be a fixed, advertised rate. In response, a number of Senators fired off a letter to AT&T, urging it to explain itself and noting that binding arbitration appears to have removed a layer of accountability at the company, allowing problems like this to only get worse:"

Forced arbitration provisions in telecommunications contracts erode Americans' ability to seek justice in the courts by forcing them into a privatized system that is inherently biased in favor of providers and which offers virtually no way to challenge a biased outcome. Forced arbitration requires consumers to sign away their constitutional right to hold providers accountable in court just to access modern-day essentials like mobile phone, Internet, and pay-TV services.

AT&T's response? To deny that they use forced arbitration at all, despite the last decade of debate on the subject and AT&T's obvious legal win. According to AT&T you see, it can't be "forced" arbitration, because consumers have the freedom not to subscribe to TV or broadband service:

"At the outset, no AT&T customer is ever 'forced' to agree to arbitration," AT&T Executive VP Tim McKone wrote in a letter to US senators today. "Customers accept their contracts with AT&T freely and voluntarily; no one 'forces' them to obtain AT&T wireless service, DirecTV programming, or other products and services."

Except FCC data indicates that two-thirds of households only have access to one ISP at "next-generation" (25 Mbps) broadband speeds, meaning if many people want to be connected, it has to be via AT&T. Even if you happened to have alternative broadband options, those companies would also employ binding arbitration thanks to AT&T's win. It's a lose-lose scenario for consumers, and one that's not getting resolved any time soon given the current dysfunction in Congress, and the downright hostility toward consumers at the current FCC.

And yes, again, it's very true that the class action system is a broken mess that all-too-often results in lawyers getting far more than the people they're supposed to be representing. But in telecom, class actions do have a history of forcing change (remember when wireless providers used to extend your long-term contract every time you made a minor billing change?). And replacing that broken system with an even worse system that minimizes accountability, erodes consumer legal rights and reduces already dwindling incentive to behave certainly didn't do American consumers any favors.

Filed Under: arbitration, broadband, class action, forced arbitration, tv
Companies: at&t

Wall Street Is Starting To Get Very Nervous About Cable TV Cord Cutting

from the from-denial-to-hyperventilation dept

Wall Street is finally starting to realize there's a storm brewing on the horizon for the nation's biggest cable companies. Cable stocks took a notable dip this week after MoffettNathanson analyst Craig Moffett downgraded the entire cable sector because of worries surrounding cord cutting and streaming video competition. Moffett, who not that long ago used to mock cord cutters for being irrelevant basement dwellers, has seen the light -- more recently noting that 2016's 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record.

And in a lengthy research note to investors this week, the analyst warned that the cable industry's approach to cord cutting (raising rates and offering horrible customer service while hoping it all works out) simply isn't going to cut it given the competitive threats to come:

"Broadband growth will inevitably slow, and it will likely do so at precisely the same time that video growth rates also come under pressure from OTT substitution," Moffett said in his Tuesday-morning note. "And while cable operators have the pricing power to offset these headwinds via their broadband business, we believe it is likely that investors will (appropriately) apply a somewhat lower terminal growth rate assumption to a business that is achieving its growth through pricing rather than unit growth."

Wall Street and the cable sector's optimism in the face of a massive sector (r)evolution is running out of oxygen, Moffett insists:

"The cable stocks have climbed a wall of worry to get here," Moffett wrote to clients. “But as any mountain climber knows, the higher you go, the thinner the air."

It's an interesting position for Moffett to take, given the fact that for years the analyst breathlessly supported broadband usage caps and overage fees as a fail-safe solution to this problem, once going so far as to declare usage caps "the next generation of communications." Arbitrary and utterly unnecessary usage caps are one trick Comcast has been using to hamstring streaming competitors, while raising prices on broadband to counter any potential TV revenue loss.

For the moment, Comcast has been cushioned from the cord cutting threat by its growing monopoly over fixed-line broadband service. Companies like AT&T and Verizon have shifted their attentions to media and advertising, and other major telcos like Windstream, Frontier, and CenturyLink lack the courage, money or incentive to upgrade their aging DSL lines at any real scale. So in many markets, customers looking for next-gen broadband speeds only have one option: cable. And when they show up, they're forced to sign up for TV services they may not want.

You'd think that a growing broadband monopoly, usage caps, and the government's decision to gut most meaningful oversight of one of the least-competitive sectors in America would have Wall Street stock jocks pretty damn excited. The fact that many of them are still very worried about the cord cutting threat to come -- despite Comcast's immense position of power -- tells you precisely what kind of threat we're looking at.

Filed Under: cable tv, cord cutting, craig moffett, tv

80% Of Cord Cutters Leave Because Of High Cable TV Prices, But The Industry Still Refuses To Compete On Price

from the it's-not-a-problem-if-we-ignore-it,-right? dept

A new study from Tivo (pdf) notes that nearly half of current pay TV subscribers are considering cutting the cord this year. That's not particularly surprising given the fact that the first quarter set cord cutting records, and the second quarter is expected to be significantly worse. Similarly unsurprising is the fact that of these defecting customers, roughly 80% of those departing say they're doing so because traditional cable TV service is simply too expensive:

37.1% of respondents spent at least $101 per month on cable TV, with some spending upwards of $150 per month, with trends only aiming higher. While cable providers often pay ample lip service to "providing value," the entire cable and broadcast sector continues to believe that it can simply refuse to compete on price with a growing roster of streaming competitors now arriving at the gates of their beloved cash cow.

Case in point is Charter Communications, which after a recent acquisition spree has been raising TV rates upwards of 40% despite the supposed bump in competition. Charter CEO Tom Rutledge, who was deemed to be the highest paid executive in the United States last year at $98 million, has insisted that these customers were simply "mispriced" under previous ownership and needed to be nudged in the "right direction" (read: paying even more money for the same service they already thought was too expensive):

"It’s a difficult thing to model. But we’re coming at it both ways, both from creating a value proposition in the pricing and packaging we have, and doing those smart things that you can do with an existing customer base that’s been mispriced to move them in the right direction."

That's gibberish, and shockingly, this kind of tone deafness to the overall trajectory of the cable sector is only causing a spike in cable TV defections at the company, which lost more than 100,000 cable TV subscribers last quarter. Tivo makes it clear that the cable industry can't continue the ongoing head-in-the-sand approach to dealing with the rise of cord cutting and streaming competition:

When the increase in monthly bills is coupled with the fact that 81.4% of unsatisfied respondents selected “Too expensive/increase fees for cable/satellite service,” it becomes evident that something must be done about this group. With more options than ever for TV in 2017, consumers continue to get smarter about their TV options, and many have discovered ways to access TV for far less than $100 a month. Skinny buddle offerings have increased, too, and options include Dish Networks’ SlingTV, DIRECTV NOW and Sony’s PlayStation Vue.

Instead of competing on price and package flexibility, most large cable companies (like Comcast) have responded to cord cutting by not only raising TV rates, but ramping up deployment of arbitrary and unnecessary broadband usage caps and "overage fees", allowing them to counter any lost TV revenues with broadband price hikes, and punish folks looking to wander away from Comcast's own TV walled garden. But Charter is prohibited from using caps for another six years as a condition of its recent megamerger, conditions the FCC has started to slowly but surely nibble away at.

Still, the cable industry has at least progressed in one meaningful metric: a few years ago it denied any of this was happening whatsoever.

Filed Under: cable, cable tv, competition, cord cutting, fees, high prices, tv