July 27, 2018 7:41 pm
In an era when millions of Americans are cutting the cord and ditching traditional TV, many more are still holding firm.
More than 90 million households still subscribe to some form of pay TV, and they often can’t envision a life without their hundreds of channels, live sports and generously sized remote controls.
Take Jon Miller, an Iowa Hawkeyes fan and sports blogger. When his team is playing, Miller likes to update his 42,000 Twitter followers in real time. That’s stopped him from switching to online streaming, which can lag behind real-time sports events by several seconds.
“A 30- to 60-second time lag of online-sport streaming means that Twitter will be ahead of me,” he said. “That diminishes my engagement.”
Cable and satellite companies are counting on these customers — call them never-cutters — to support their business at a time of record defections. The number of viewers abandoning pay TV is expected to increase by a third to 33 million this year, according to research firm eMarketer.
AT&T and Comcast, the two largest pay-TV providers in the U.S., may be able to replace those customers by signing up people for online TV packages. But those services typically bring in less revenue. Charter Communications, the industry’s No. 3, will update its subscriber rolls when it posts second-quarter earnings next week.
The uncertainty has led companies to make increasingly aggressive moves. Comcast is currently bidding for Sky Plc, a U.K. broadcaster, which would reduce its dependence on fickle U.S. customers.
But the picture for cable companies may not be as bleak as people think. Netflix added about a million fewer customers than expected last quarter, a sign traditional TV may be holding some of its ground.
Dire predictions about pay-TV defections may not pan out. The top cable companies lost about 305,000 subscribers in the first quarter, an improvement from the 515,000 defections in the year-earlier period, according to Leichtman Research Group Inc. There are still about 92 million pay-TV subscriptions in the U.S., the firm estimates.
Jay Roth, chief marketing officer at Dish Network Corp., sees fully functional remote controls as one factor that may keep customers loyal. Customers also want niceties like channel guides and access to local channels, he said.
“Our customers don’t want to cut the cord because they’d have to give up critical features like the ability to skip commercials, no buffering, and a vast and diverse selection of live TV channels that the whole family watches,” he said.
While there is a profound shift underway in how households consume content — and where they get it from — there is still no perfect substitute for the full cable-TV bundle, said New Street Research analyst Jonathan Chaplin.
For a household of four with diverse viewing habits, it’s hard for online TV services to offer the same value. Plus, the family will probably have to pay more for internet access to handle the increase in streaming.
“The death of the big cable bundle has been greatly exaggerated,” Chaplin said. “This suggests there will be a place for the traditional cable bundle in most households for a very long time.”
At the same time, many streaming services are increasing their prices. That’s made the idea of cobbling together several products — in a bid to replace a cable bundle — less palatable.
YouTube TV, Sling TV and Sony Corp.‘s PlayStation Vue have all boosted their monthly rates by at least $5 this year. AT&T’s online TV service, DirecTV Now, will increase prices by $5 at the end of the July.
Value in a bundle?
Streaming services remain fragmented, and that’s unlikely to change soon. Filmstruck, for instance, will give you classic and art-house movies for $11 a month. Shudder is dedicated to horror movies, while an upcoming service will give you all the DC Comics content you want. The cost of paying for multiple services can quickly add up.
Longtime cable TV subscribers also may not want to deal with the hassle.
There also could be a generational rebound, said New Street Research’s Chaplin. The young people who have cut the cord may see more appeal in cable later on, he said.
“When they marry and start a family, the value offered by the cable-TV bundle may well be compelling enough to draw them back in,” he said.
— Bloomberg News
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