Cable companies are bleeding customers, yet it doesn’t seem that many of their former subscribers are turning to any of their direct competitors. According to a recent Associated Press report, these individuals may actually be willing to go without pay TV.
This trend may be the sign that Internet TV services such as Hulu and Netflix may be enough to entice individuals to cancel their cable services. Company executives are taking a different approach and blaming the weak economy and the housing market – which would indicate this trend would eventually reverse.
If it is true that Internet video is driving this trend, the implications are far-reaching. Consumers opting for the Internet as the primary tool for movies and TV shows are bypassing cable services and the networks that produce the content. This could have the same effect on the TV and movie industries that digital downloads has had on music – which is not all bad.
According to Landel Hobbs, Time Warner Cable Inc.’s chief operating officer, his company has not seen any evidence of people dropping cable in favor of the Internet. He pointed to people who don’t have cable broadband services seem to be the biggest group canceling their service – which means they wouldn’t have access to high-speed Internet. He believes they are giving up on pay TV or going to satellite.
One theory explored by the company is that college students may be among the first to drop cable TV. Hobbs noted that the company will continue to monitor cord-cutting, but has not found evidence to suggest this trend is anything other than standard changes for customers.
Overall, Time Warner Cable lost 155,000 video subscribers in the July-September quarter, compared with 64,000 for the same time frame in 2009.
Subscriber loss for Comcast Corp., has more than doubled in the third quarter to reach 275,000. Executives say many of those leaving had actually taking advantage of low introductory rates offered when analog TV was shut down. Increases rates change the picture for these customers.
Among the publicly-traded pay-TV companies, which represents about 85 percent of the subscriber total, third quarter results show a combined gain of 66,700 video subscribers, or a 0.3 percent increase at an annualized rate. This number does not show results from the third-largest cable company, Cox Communications, as it is privately-held.
If Cox had losses similar to those of Comcast and Time Warner, the nine largest pay-TV companies had a zero net gain for the latest quarter and lost subscribers in the second. At the same time, Netflix streaming services has risen to such great popularity it is now the largest source of U.S. Internet traffic during peak evening hours.
The numbers point to a definite change in the industry and while cable providers would like to be able to cater to consumer demand, content providers won’t license their channels one by one, forcing subscribers to take big, expensive channels full of programming they don’t want and won’t watch.
Eventually, this will have to change as everyone in the supply chain wants to drive revenues and consumer demands are changing. Those who come out on top already understand the trends and can capitalize on them at the same time.
TechZone360 Contributing Editor
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