Tag Archives: cord cutting

Cord cutters hurt cable but are killing AT&T

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AT&T’s overall television subscriber count is down, despite the strong growth of of its online video service, DirecTv Now. That’s according to a federal securities and exchange commission filing by the company. Even though it signed up 300,000 new online viewers to DirectTv Now in the third quarter of this year, its total video subscription count dropped by 90,000 according to the filing…

The video net losses were driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards.

The growth in over-the-top TV viewing is actually the major reason AT&T’s total video subscriber numbers are falling, according to an article by the Washington Post’s Brian Fung

“DirecTV, like all of its cable peers, is suffering from the ravages of cord-cutting,” said industry analyst Craig Moffett in a research note this week. Moffett added that while nobody expected AT&T’s pay-TV numbers to look good, hardly anyone could have predicted they would look “this bad.”

Cord cutting is also driving down cable revenues. The solution, according to an article by Daniel Frankel in FierceCable, is to raise Internet service prices…

“MSOs would need to raise standalone broadband pricing to $80, or more, in order to break even from a contribution perspective,” UBS analyst John Hodulik said.

The good news (for operators, but not consumers, that is)? Cable companies can probably get away with it, the analyst noted.

“We find that this level of pricing (non-promo) exists in some markets already, though pricing will vary,” Hodulik explained.

Cable companies have it easier than telcos. They’re losing video revenue, but are better at hanging on to subscribers. Cable companies generally offer download speeds of 100 Mbps or (sometime a lot) more for prices comparable to what telcos will charge for a tenth of that service level. A household that wants to get TV programming via the Internet is going to be more interested in those faster speeds.

Cable subs shave before they cut

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The pay TV subscriber count in the U.S. dropped below the 100 million mark in the fourth quarter of last year, according to Nielsen. That’s the number of households that buy traditional television programming packages from either cable, telephone or satellite companies.

The declining fortunes of traditional linear television are directly linked to the viewing – and buying – habits of young adults, age 18 to 34. These cord cutters are more likely to have broadband connections with enough oomph to handle video streams and pay for subscription video on demand (SVOD) services like Netflix.

But it’s not just younger cord cutters that are giving the cable industry heartburn. Cord shavers of all ages – people who trim back the number of channels they buy – are an even bigger problem, according to a story in Broadcasting & Cable

Nielsen’s cable universe estimates for April show a 1.7% decline in pay TV households but a bigger drop in subscribers for some cable network owners, according to analyst Brian Wieser of Pivotal Research.

To Wieser that suggests that while cord-cutting might not be the threat it was cracked up to be, cord shaving could be a bigger issue.

The acceleration in the cord shaving rate also indicates an increasing reliance on broadband connections for television viewing. Money gets spent on SVOD service instead of a fatter cable package. But there’s still a huge demand for linear video service at some level – 99 million customers is nothing to sneeze at. It’s still 85% of the U.S. market. Only 3.9 million households rely solely on broadband for television, about 3% of the market. That’s why Google Fiber bothers to include linear video service in its offerings, despite lagging take rates.