Why Isn’t Cord Cutting Going Faster?

If cord cutting is such a big deal, then why aren’t more people leaving traditional television? That’s a question I’ve been asked several times lately and it’s a good one.

Cord cutting is definitely real. Numerous articles make cord cutting seem like an imminent disaster for the cable industry. But industry estimates are that between 1.7 million and 2.5 million people walked away from traditional cable TV in 2016. The lower number is the net drop in national cable subscribers while the higher number takes into account the fact that there were over a million new housing units built in the country – and I think the higher number is closer to correct.

And while losses of that many customers hurts the cable industry, it’s hard to yet call it a flood. If annual losses stay at this level the cable industry will still have over 50 million customers twenty years from now. The real story might be that most people aren’t yet cutting the cord. There are a lot of reasons for this, but I think the most important ones are:

People Still Like Cable. Total pay television subscribers just fell to under 100 million sometime last year. There are a lot of households that still like the variety of channels that come with the big packages. While a lot customers are now time shifting by the use of DVRs and TV everywhere, they still like what they are buying.

Bundling Discount. It’s really easy to forget that the big cable companies have priced their bundles in such a way as to penalize customers for leaving just one service. Cord cutters generally want to retain their broadband while dropping cable – and when they go to do this they find that the savings is not as large as they thought. Interestingly, if you want to keep cable and drop broadband the same thing is true. The big cable companies apply the ‘bundling’ discount to whatever product you want to drop – meaning that you then revert to paying full market price for whatever product is kept. People that want to save $20 per month by switching to an OTT service like Sling TV quickly find out that they actually won’t save much.

Cord Shaving Instead. There is a whole lot of cord shaving going on – that is, people migrating to smaller cable packages. Cord shaving lets people who mostly like Netflix to keep local network stations and a few other things they like about traditional TV, without fully cutting the cord. This is best evidenced by looking at the subscriber numbers to the various cable networks, which are losing subscriptions at a much faster pace than total pay TV subscribership. For example, ESPN has lost around 12 million subscribers since their peak in 2013, and the majority of other cable networks are also seeing large subscriber losses. Since the total net subscribers to pay television are dropping more slowly, the only explanation is that customers are opting out of the big cable packages for smaller ones. The cable companies don’t release statistics on cord shaving, and so we can only guess at the magnitude of the changes by seeing what is happening to ESPN and other networks.

The Alternatives are not that Different. Over half of the homes in the country now subscribe to at least one of the OTT services like Netflix. But it appears that most homes are viewing this content as alternate content and not a straight replacement for traditional cable.

There are a lot of new alternatives to traditional cable such as Sling TV or Playstation Vue – but I don’t think most customers are seeing them as significantly different than traditional cable content. I’ve been trying some of these services and they honestly still feel like cable. The content is mostly streamed at fixed times and even with smaller line-ups I find I’m not interested in most of the channels they carry. While these alternatives can save money, they often don’t have the same reliability or quality of picture as a cable system. The bottom line, at least to me, is that services like Sling TV still feel like cable offerings to me.

It’s Not Easy for Some. It’s not easy for the technically unsophisticated to totally cut the cord. Unless you live in a major metropolitan market you’re going to want to somehow tie in your local network stations with other online programming, and that is still not that easy. You can get an antenna to pick up off-the-air content, but that is not easily integrated into any easy-to-use program guide or search engine.

It’s also not always easy to drop the cable company. People get tied up in contracts that are expensive to break. There is a whole gauntlet of steps needed to get away from the cable company from listening to retention specialists to returning settop boxes that make leaving a hassle – and the cable companies know that these tactics work.

We may get to a time when cord cutting accelerates more quickly, as happened with landline telephones. But before that happens there needs to be easier to use and more satisfying alternatives to draw most people away from traditional cable altogether. If there is any one issue that might push more households over the edge it’s the price of cable packages – but the big cable providers are now introducing skinny bundles to try to retain the budget minded customers. I’m looking at the numbers and thinking we are going to have traditional cable around a lot longer than many people predict.

One thought on “Why Isn’t Cord Cutting Going Faster?

  1. Your conclusion is right and you’re also right that the new services like Sling TV are like traditional cable. But Sling gives flexibility so that it can be watched on multiple devices anywhere in the country, and is not user isn’t tethered to the home. Also, the younger crowd are rarely watching TV like we older folks do. I’m the 50-ish dad in a family of 6. I realized a year ago that my kids (20, 17, 15, 8) were watching mainly Netflix, except for baseball on the Yankees network and a few soccer games on others. I watched some of those games too and a few programs on a couple of cable networks. My wife watched HGTV. We both watched a few shows on broadcast networks. Our landline rang only at dinnertime and was basically a way for telemarketers to contact us. Otherwise, cellphones were how we communicated. The only part of the bundle we needed was the broadband. I put up an outdoor antenna and connected 3 TVs, receiving 60+ channels. I found Sling TV had HGTV, the Yankees network and the sports package for $5 more got the soccer games. We made the switch. Our cable company told us it was $60 monthly alone or $55 with basic cable. We took the latter, but we are not connected; we use the antenna. Netflix is still the go-to option for the youngsters as well as other on-line sites. Sling TV satisfies my wife and the baseball and soccer needs for $20 a month. I can adjust the streaming quality and have rarely had a glitch in watching anything. The antenna works great. We use Rokus and the apps we have discovered provide additional programming. We have more options now of programs than with the boxes. I have found websites that give a guide for what’s on that are easy to use.

    It is different and requires a change of how we use TV. But now it’s natural. Integration of the OTT services and antenna channels is possible now with new devices hitting the market to make it easier. For people like me and my wife, they will be desirable. They may be the way that brings the younger crowd to broadcast TV simply because it will make it easier for them to stumble onto channels.

    Right now, we are saving about $1000 annually. It wasn’t a question of affordability, but of value. We paid for a phone line we no longer used, along with the taxes and fees for the privilege. We paid for way more channels than we ever watched, along with boxes and other fees. And we did that for years. Now we are getting good use and value for our money. And over the past year, no one has ever said they missed the old set-up.

    What I’m finding interesting is watching the youngsters and how they get their programming. If I was a traditional cable company, I would be very worried for the longterm. My kids won’t be getting a traditional cable hook-up when they go out on their own. I’m not sure they will even hook up an antenna. But OTT services like Netflix and maybe even Sling TV will get their money. Of course, future programming and delivery models will determine how things play out, but the way it’s been done for the last 30 years has a limited life and will shrink as the older folks die off and the younger ones take their place.

    Like

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