Cable companies have been losing TV subscribers at an ever faster rate in the last few months, and satellite TV isn’t picking up the slack. That could be a sign that Internet TV services such as Netflix and Hulu are finally starting to entice people to cancel cable, though company executives are pointing to the weak economy and housing market for now.
Third-quarter results reported by major cable TV companies show major losses, but don’t settle the question of what’s causing them.
If “cord-cutting” in favor of Internet video is finally taking hold, that has wide-ranging implications. Consumers who use the Internet to get their movies and TV shows bypass not just the cable companies, but the cable networks that produce the content. The move could have the same disruptive effect on the TV and movie industries as digital downloads have already had on music.
A few weeks ago, the CEO of phone company Verizon Communications Inc. likened cord-cutting to what started happening to the local-phone companies five or six years ago, when people started giving up their landlines in favor of relying solely on their cell phones.
“The first thing when that happens is you deny it,” Ivan Seidenberg said. “I know the drill. I have been there.”
On Thursday, Time Warner Cable Inc.’s chief operating officer, Landel Hobbs, said the company doesn’t see evidence of people dropping cable in favor of the Internet. He said the biggest subscriber losses have been among people who don’t have cable broadband services; high-speed Internet — from cable or a competitor — is key to watching video online. These people seem to be going to satellite or giving up on pay TV entirely.
On the theory that college students might be among the first to drop cable TV, the company looked at changes in subscriber figures in college towns such as Austin, Texas, and Columbus, Ohio. They weren’t out of line with previous years, and they corresponded to the level of student enrollment, he said.
“We’ll continue to monitor cord-cutting, but haven’t found evidence where you might expect to see it,” Hobbs told analysts on a conference call.
Time Warner Cable lost 155,000 video subscribers in the July-September quarter, compared with 64,000 a year ago.
The only larger cable company, Comcast Corp., reported last week that its subscriber loss more than doubled in the third quarter, to 275,000. Comcast said many of those leaving had taken advantage of low introductory rates that the company offered last year when the analog TV broadcast network as shut down.
All together, seven of the country’s nine largest pay-TV companies, representing about 75 percent of the subscriber total, had reported their results for the third quarter by Thursday. They showed a combined gain of 95,700 video subscribers, or a 0.6 percent increase at an annualized rate, less than the growth of the population. In the third quarter of last year, they gained 405,800 subscribers.
Missing from the top nine: the third-largest cable company, Cox Communications, which is privately held and doesn’t report subscriber counts publicly; and the second-largest satellite TV company, Dish Network Corp., which reports results Friday.
Cable companies have been losing video subscribers for some time, but they have been compensating by upgrading basic subscribers to more expensive digital tiers, as well as adding broadband and phone subscribers.
However, both Time Warner Cable and Cablevision Systems Corp. lost digital video subscribers in the third quarter. Both added record-low number of phone subscribers, as years of growth are coming to an end.
Meanwhile, Netflix Inc.’s streaming service has become so popular that it is now the largest source of U.S. Internet traffic during peak evening hours, according to Sandvine Inc., a Canadian company that supplies traffic-management equipment to Internet service providers.
A variety of gadgets can send Netflix’s streams to the living room TV, including game consoles and the $99 Apple TV box. Many high-end TVs now come with the built-in ability to play Internet content.
Thomas Clancy Jr., 35, in Long Beach, N.Y., canceled the family’s Cablevision subscription this spring. He said he has been happy with Netflix and other Internet video services since then, even though there isn’t a lot of live sports to be had online.
“The amount of sports that I watched certainly didn’t justify a hundred-dollar-a-month expense for all this stuff. I mean, that’s twelve hundred dollars a year,” Clancy said. “Twelve hundred dollars is … near a vacation.”
But Clancy — who has no relation to the thriller writer — is also an example of the hurdles cord cutters face. He uses an Internet-connected Blu-ray player to get Netflix movies to the TV. And he pulls a cable from his computer to the TV for Internet content Netflix doesn’t have. Clancy owns a computer consulting firm and is tech-savvy enough to do all that. Most people wouldn’t know how.
Cablevision wanted to raise Clancy’s Internet bill when he canceled TV service. That would have made cord-cutting less attractive, but he happens to live in an area where Verizon provides Internet service at speeds that are comparable with the best cable has to offer. He got a better deal from Verizon and switched to that provider.
Most people who have the technological skills to take advantage of Internet video find that the selection of movies and shows isn’t broad enough to make the jump worth it, Sanford Bernstein analyst Craig Moffett said.
On the other hand, poor people have an excellent motive to cut cable and simply replace it with an antenna or nothing at all, he said.
“The price cable TV has risen to the point where it’s simply not affordable to lots of lower-income homes. And right now there are an awful lot of lower-income homes,” Moffett said. “The evidence suggests that what we’re seeing is a poverty problem rather than a technology phenomenon.”
In addition, high unemployment means fewer new households, as kids are probably delaying moving out of their parents’ houses, or people move in with roommates. That can reduce the number of households that pay for TV.
Cable companies would like to get low-income customers back with cheaper cable packages, but their hands are tied. Content providers such as The Walt Disney Co. and News Corp. won’t license their channels one by one, so subscribers have to take big, expensive channel packages, or very basic ones, which offer little beyond what’s available with an antenna.
Content providers now get billions of dollars in fees from cable service providers, and they want to make sure that whatever new industry model comes along, they’ll get paid. It’s not obvious yet that Internet video will let them sustain their profit levels.
Six companies create the content that consumes 85 percent of U.S. viewing hours, Moffett said. “Until they get on board, the train’s not leaving the station.”
I am ready to leave Comcast and it has nothing to do with internet TV. Their customer service is a joke and they purposefully mislead people about hidden fees. The quality of programming on the most basic package doesn’t warrant a $1,000 yearly price tag, especially when you can go out and purchase boxed sets of your favorite shows for considerably less. Additionally, the internet is $500 per year, which is insane compared to spending $200 to use a cell phone as a modem. Everything comes with “free” extras and some sort of catch. That’s why I am leaving Comcast.
It could also be that over the air television is adequate. I got a new antenna and get 4 more channels of Jesus and car ads, and 4 more channels of PBS; three the same. No need to pay $800 a year minimum for that.
Due to the deplorable customer service at Comcast, I too will jump ship when I find a replacement service, and it has nothing to do with the economy.
Canceled cable 2 years ago. The high def air wave signal has a better picture quality then comcast. Like the other comments why pay $800-1000 a year for watching a hand full of channels. Also, comcast charges $9 for high def service and $5 for high def box. If comcast charged $30 a month for what they charge $70 I might think about getting cable turned back on.
Talk about burying the lead – this story’s most important sentence is in its last paragraph:
“Six companies create the content that consumes 85 percent of U.S. viewing hours.”
The unregulated conglomeration of media companies is the reason you pay so much for content. Welcome to Republican economics – and you fools just gave them more power. So stop complaining, it’s what you voted for.
Just like Republicans voting against their better interests, people PAY for HD TV when its free over the air. Ha! Wake up, sheeple!
Hopefully the Government doesn’t give them a bailout.
We dropped our HBO service from Comcast, it was $18 a month. We promptly ordered Netflix then. That costs us $9 a month and WE get to pick what we want to watch. We also get 1 DVD at a time. With HBO, there was usually garbage on and watched it for maybe 1 hour a week.
$65 a month for just basic cable is crazy ($83 when we had HBO). Cable companies are going to end up like the Video Stores unless they change their pricing to be more competitive.
The only time I want to watch TV is to see a breaking news story (and an occasional sports event). And over-the-air TV is adequate for that.
Given a choice between an hour of internet, a DVD, and plain-old-veg-out TV, the TV comes in dead last.
Why pay $50+/month for something one seldom uses??
I canceled Comcast before they even got into HD. Customer service was BRUTAL. I’m surprised they still exist in Chicago. Switch to Wowway and while it’s OK I don’t get the channels I’d rather have, meaning I have to pay more which I won’t do. I wish one company would go to you select the channels and pay for them and them only and I’d might just switch. There are so many bogus channels nobody in my family watches. No way would I pay for a movie channel when there is Netflix and Redbox.
look back at what happend to the phone compines. no pay phones,evary one is cutting home phones.and they call it progress.they sell it,and we buy it,cause we want it.
I dropped cable in favor of a new rooftop antenna. I miss some sports, but overall, I find I have a LOT more free time to do other things. That’s time I would have spent channel-surfing through the myriad of junk on cable TV.
The only reason people pay for TV is because the cable/sat/FIOS companies told them to. The digital transition changed everything about over-the-air TV, and people are waking up to this fact. Antenna sales are way up, and the AVS Forum is filled with new members who have just dumped the corporate thieves and are looking for antenna advice.
remember that song? IN THE YEAR 2525
Why doesn’t’ everyone simply cancel all of this unnecessary nonsense. All I see is cable & satellite subscriptions constantly increasing in cost. When will you say “ENOUGH ALREADY” & give it up. There are better things to do with your money. I canceled Direct TV 4 years ago & haven’t looked back. I don’t miss it & I’m saving a considerable amount of money in the process. I would love to see everyone simply say ADIOS to they’re providers. Then, perhaps, you’ll see rates go down & quality improve. “Over the air” is FREE & the HD content is FREE… as is should be. I get all I need through “over the air” content. By the way, “over the air” HD tv is higher quality than cable or satellite HD due to the fact the signal is not compressed! One more thing… since canceling 4 years ago I’ve managed to save roughly $4,500 dollars! Wise up!
My Sport Center has personal TVs on the aerobic machines. The purpose of the TVs is to add finger exercises to your routine. Some machines have the channel control on the left, others on the right. So you can alternate days changing channels with your fingers for an hour. The sad thing is: that is the truth. If the Discovery Channel or History Channel has a show on that I haven’t seen, my fingers are quiet. Otherwise I spend the entire hour switching channels because I can’t find anything but mindless dribble. The time of day doesn’t matter. Apparently, TV shows target the knowledge challenged! They often won’t have the money to pay for cable TV when they live in a Democrat run state with high unemployment. Go figure!
I dropped Comcast about 6 months ago and I’m perfectly happy. Their service was lousy and I just didn’t watch enough tv to justify the price. My household switched our internet service to Clear for $50/month and a two DVD Netflix package for $13/month. You can’t get cable for that price! Now my husband and I can watch our favorite shows or movies whenever we like, no whining about “there’s nothing good on tv”. We can watch on our tv through the Wii for a big screen, or on our laptops if we don’t want to watch the same thing. Netflix streaming offers more of the shows I like than Comcast’s “on demand” did. Now if CBS will just get on the bandwagon with Hulu or Netflix! Yeah, you can watch at CBS.com, but it’s super slow and glitchy with lousy buffering.
This story is absolutely accurate about the deplorable rate of cable television, not only in Chicago but in the country. We cancelled out cable tv service, which was $117 monthly, with taxes. We hvae internet, Netflex and Hulu and couldn’t be happier!
I left cable because the prices are too high for the quality of service you get. Until big cable moves to an a la carte channel by channel service I’ll easily pay the $20 or so for Hulu+ and netflix. Heck I would consider paying up to $50 a month for those subscriptions and the ability to watch what I want, when I want with significantly fewer or no commercial interruptions.
People, for years, have been asking for ala carte programming–that is, where you can choose and pay for only the channels you want and nothing else. (So, no Pat Robertson or shopping channels.) However, the cable industry has fought this and used their GOP friends to stop the legislation to allow it. For ourselves, we stopped getting full cable service for financial reasons, but noticed that our son immediately spent more time doing his homework without being asked. We aren’t getting rewired again for quite a while.
We haven’t had cable since we moved out of our mid-rise apt. building into a single family home. Don’t miss the expense or the bad service or the package that forced us to pay for content we didn’t watch.
We get Netflix in the mail. Soon we’ll stream it as well. We’re also going to get Roku for additional content. $59.
For HBO series and the like, I just rent them a season at a time and watch on my own schedule.
We have friends who went back to rabbit ears and get great reception even with the TV in their basement. And this is in Chicago. No, you can’t get absolutely everything this way, but right now cable doesn’t have anything I value enough to pay their price for.
Cable TV is obsolete. Simple as that. In 10 years, it will probably cease to exist.
Trying to convince the GF to ditch cable, but she’s addicted to Bravo reality shows. Would love to get the Netflix package with a Roku or Google box and be done with $100/mnth cable bill. Use a USB tuner on my laptop to get local channels and the picture quality is far superior to even HD option on cable. Americans are slow to pick up on this, but sooner rather later, will see a mass migration from the pay tv model practiced by cable and satellite providers.
I’d have no problem paying if I thought there was something worth watching. But for $100/month, it’s going to have to be an awful lot of something. As it is, library books are free, and more entertaining to boot.
Cable TV is a very poor value for the cost.
I must be too old fashioned; my rooftop antenna combined with many more HDTV channels over the air = lots of $$ saved each year by living in the past.
If the cable companies don’t change their business soon, this is just the beginning of the end. Ask the record companies how things went when they didn’t update their business model and continued to try and gouge consumers with $17.99 CDs of albums that were already over 20 years old. People found a cheaper alternative. Once they get used to a cheaper alternative, they don’t go back. Their are SOOOOO many alternatives to cable right now that if cable doesn’t fix their terrible service, expensive prices and archaic tiers of channels forcing you to buy 10 channels you don’t want just so you can watch the two you do want….. there will come a point of no return and it will be all over for them. Not that I’ll miss them one bit but they still have a little time left to save their a**. I wouldn’t bet on it though.
WooHoo! I never use cable anyway. Just porn ads. Waste of money.
you would see that your prices would be even higher. Think about it, you get about 100 channels for $60.00/month, that comes out to $1.66 per channel. Do you really think that if they went to ala carte that you would pay $1.66 for each channel? NO…You’d actually be paying more like $5-10.00 for every channel you want. So, let’s do the math again: 30 channels multiplied by $5-10.00/channel = $150.00 to $300.00/month.
There’s the ala-carte pricing you want. I’ll take it the way it is now. Leave well enough alone. If you want really cheap TV, put an antenna out your window and stop blaming the GOP for all your woes.
Y
Someone needs to work on their math!
WOW -This story is very misleading. SATELITE TV is picking up all of Comcast customers. Direct TV in particular saw huge growth. It is all about cost and secondly customer service. How the cable providers can lose subscribers and Direct TV adds HUGE numbers of subscribers and then the AP makes a totally inaccurate statement “satelite TV isn’t picking up the slack” – they have to have some motive for directly giving false information here.
I would prefer a la carte. I think many garbage networks would simply go out of business which is market forces at work, and some new networks would appear. A la carte may persuade networks to actually put programing that people want to see. There may be better quality programs. Out of the cable channel lineup in my area, there are only about 10 channels I care about. The rest I could care less about.
at&t U-Verse is da bom!
I subscribe to Netflix, but i am one of those unfortunate customers who doesn’t have high-speed internet, so i only get the discs. I have basic plus cable. I love my cable because mainly because of ESPN, but also because of other networks. I don’t want to get rid of my cable at all. Like i said, i love my cable. I’m not a digital customer; i’m an analog customer. Trust me when i tell you this: if my cable company ever stops broadcasting analog, i’m gone. Period.
I am getting sick of cable tv. I would say that I spend about 90% of my tv time on Netflix or watching bluray or DVD’s. Cable TV is not only boring, full of channels I do not watch and hate paying for, but the number of commercials have increased between program segments (I counted about 10 during one episode of CSI I was watching.) and to add insult to injury, they insert MORE advertising at the bottom of the screen DURING a program which is REALLY irritating. Yes, I have to pay for Netflix, but I am paying for what I WANT to watch, commercial free, without having characters come from the corner of my screen that have nothing to do with the program I’m watching. Cable TV sucks!
Bring the outsourced jobs back to where they belong. To the people who are out of work. The customer service services are disgusting.
I can’t stand Charter cable they suck too seems like everyday the screen freezes or goes to little square boxes yay for that new digital signal! I say go back to analog tv when it was $8.95 a month not $108! half the channels I don’t even watch and you cant pick and choose what you want. I am thinking about getting a antenna and a converter box.
I dont have cable either I just watch on the internet or download what I want on the internet I never will pay for the over priced BS they put on cable ever again,its not worth the money.
they are pricing themselves out of the market.
cancel your cable day is January 11th, 2011. 1/11/2011 The day we freed ourselves.