The Cable Industry Thinks Mindlessly Raising Rates Is A Good Idea In The Face Of Fleeing Subscribers

from the that'll-work dept

While cord cutting has been a small but important phenomenon for some time now, there are indications that the trend may be poised to accelerate in 2015 when a bevy of new live Internet video streaming options from HBO, Showtime, Sony, Dish and Verizon emerge. Cord cutting continued at a slow drip last quarter, with traditional pay TV operators losing a net 179,000 customers. Satellite companies Dish and DirecTV, which used to be immune to these defections, are no longer so; DirecTV lost 28,000 customers last quarter -- the first time they lost customers during Q3 in the history of the company.

Even industry analysts, who historically have ridiculed cord cutting as a hallucinated phenomenon reserved only for poor nobodies, have changed their tune. With the cord cutting trend clearly established and cable customers getting annoyed by often bi-annual rate hikes, how are many cable companies responding? Why, the one-two punch of denial and raising rates, of course!

New York's Cablevision is a prime example. At one time a cutting edge company that offered some of the fastest speeds at the best prices in the industry, over the last few years the company has resorted to winking and nodding at regional competitor Verizon every time it's time to raise rates on TV and broadband services. Company chief James Dolan recently declared that offering promotional rates and trying to compete on price was a "dead end" for the company, and as a result, a recent SNL Kagan study showed how Cablevision customers paid some of the highest prices for cable anywhere.

The result? Cablevision lost 56,000 video, 23,000 broadband and 33,000 Internet voice subscribers last quarter, but saw a 3.7% jump in net revenue. So stock jocks are temporarily happy, but that's not really a sustainable way to function long term -- unless of course your long-term goal is to sell your company to Comcast. James Dolan told analysts last last week he sees the cord cutting trend but isn't really worried about it:

"I don't know that it's necessarily disruptive to us yet as a multichannel provider, but we're keeping our eye on it. Ultimately, cord-cutting and going to over-the-top is something that we do believe is going to happen, and we're preparing ourselves for it. But I think that's all I can say about it at the moment."

Why aren't cable execs like Dolan worried about Internet video disruption? Because they know that because they see even less competition on the broadband side than they do on the TV side, they can continue raising rates there (inevitably in the form of technically unnecessary usage caps) relentlessly for the foreseeable future. In other words, cable companies are going to ride the pay TV cash cow right into the ground (while providing some of the worst customer support in any industry), then when Internet video takes off, shift their focus to new and creative ways to jack up prices thanks to the lack of competition in the field.

Filed Under: arpu, cable, cord cutting, increasing rates, rates
Companies: cablevision