Cord Cutting Accelerates Faster Than Expected, As Cable Still Refuses To Compete On Price

from the inevitability dept

As we just got done noting, roughly 5.4 million Americans are expected to cut the TV cord this year, thanks largely to the rise in cheaper, more flexible streaming TV alternatives. And while some traditional cable TV providers have responded to this challenge by competing on price and offering their own cheaper streaming alternatives (AT&T's DirecTV Now, Dish's Sling TV), most of the cable and broadcast sector continues to double down on the very things causing this shift in the first place. Like a refusal to invest in customer service, an obsession with mindless merger mania, and seemingly endless price hikes.

Companies like Comcast have tried to stall this natural evolution by striking marketing partnerships with Netflix and including Netflix in their set top boxes, in the apparent hopes that users won't get rid of traditional cable if they're already getting Netflix as part of their monthly cable, broadband, and phone bundle. But data released this week indicates that this effort to stop cord cutting by cozying up to Netflix isn't really working, and cord cutting is accelerating at a rate notably faster than many analysts predicted:

"Even as traditional pay TV providers form partnerships with former over-the-top (OTT) rivals to retain customers, cord-cutting continues to outpace projections. According to eMarketer’s latest figures, the number of cord-cutters—adults who have ever cancelled pay TV service and continue without it—will climb 32.8% this year to 33.0 million. That’s higher than the 22.0% growth rate (27.1 million) projected in July 2017."

Comcast cozying up to Netflix isn't working because the industry continues to misread the situation. Customers are cutting the cord primarily due to the high cost of mandatory, bloated cable bundles filled with channels nobody actually watches. Comcast's solution was to include a Netflix subscription -- but only if you subscriber to Comcast's higher end TV bundles, something that certainly doesn't address the actual problem.

The report proceeds to note that users are drawn to streaming alternatives for a number of reasons, not least of which being the rise in quality original content at Netflix, Hulu and Amazon, but the lack of obnoxious, hidden surcharges and fees:

"The main factor fueling growth of on-demand streaming platforms is their original content,” eMarketer principal analyst Paul Verna said. “Consumers increasingly choose services on the strength of the programming they offer, and the platforms are stepping up with billions in spending on premium shows. Another factor driving the acceleration of cord-cutting is the availability of compelling and affordable live TV packages that are delivered via the internet without the need for installation fees or hardware."

So why aren't more cable companies competing on price? While cable companies that charge an arm and a leg for DVRs and cable boxes aren't blameless, broadcasters largely dictate programming pricing. And while that's not as big of a deal for companies like AT&T and Comcast that are broadcasters, it's an untenable situation for smaller cable ops, who already have pretty tight profit margins on pay TV due to high broadcaster rates. The same broadcasters who will, of course, be partially responsible for the steady price hikes we're also starting to see in streaming services.

But companies like Comcast refuse to compete on TV pricing for another reason: they know that a lack of competition in broadband (which is actually getting worse in many areas) means they can relentlessly jack up prices for broadband to recoup any lost revenue on the TV side of the equation. That means not only higher overall prices for broadband, but the implementation of usage caps and overage fees, unnecessary surcharges that not only make broadband more expensive, but make cutting the cord more difficult and costly as well.

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Filed Under: cable tv, competition, cord cutting, tv

Companies: at&t, comcast, netflix