Why are Cable Companies Losing Viewers?
While Americans are watching more TV than ever, up 22 minutes a month this year for a monthly average of 158 hours and 47 minutes (that’s over 5 hours a day), cable subscriptions are down while people opt for internet and satellite-based services. In the first quarter of 2011, 91% of U.S. TV households had a subscription service. Of that 91%, 53.8% had a cable subscription, while 30.2% had satellite and 6.7% had a service through a telephone company like Verizon (NYSE:VZ) Fios.
While those numbers are reassuringly high, showing that Americans are watching more TV and subscribing to more services than ever, it’s been satellite and telco video distribution services that have seen all the growth, while cable fell almost 2% during the first quarter of 2011 compared to the same time last year. And those numbers threaten to continue their descent. Children between the ages of 12 and 17 spend a third of their time on the internet watching video, making grim prospects for cable companies that are rather easily replaced.
Cable companies do recognize that they aren’t obsolete — they are still a service that most Americans would like to have. The issue is one of affordability. Especially in a recession, Americans are looking for ways to trim the fat from their household budgets, and with so many other viewing platforms, cable has become an easier cord to cut than it was five years ago.
At the National Cable & Telecommunications Association’s annual convention in Chicago this week, top industry executives acknowledged that it was ultimately pricing that was hurting their subscription numbers. “There clearly is a growing underclass of people who can’t afford the services they want. It would behoove all of us to work together to meet the needs of that population,” said Time Warner (NYSE:TWX) Cable Chief Executive Glenn Britt. Could this mean we can expect to see cheaper cable services in the future? One possibility is an à la carte option, allowing subscribers to choose the stations they’d like to receive. Right now, most cable companies have basic packages with a very limited number of stations, and then the next package up contains more than most people would watch.
However, it seems more likely the cable companies will find other ways of “cutting costs” to consumers. A quick look at Comcast‘s (NASDAQ:CMCSA) website and they are offering an introductory price of $29.99 a month for the first 12 months of their cable service. We all know the deal–the service starts out cheap to hook you and then prices jump up. However, it used to be you could bail after the price hike proved to be a bit too steep. Now Comcast’s discounted offer only comes with a 2-year agreement, which means you’re locked in for an entire year at the higher price. Looks like they’ve learned something from the mobile phone carriers.