It’s obvious in looking at the performance of cable companies in 2018 that cord cutting is now for real. The fourth quarter count of cable customers for the largest providers was recently reported by the Leichtman Research Group. These companies represent roughly 95% of the national cable market.
|4Q 2018||4Q 2017||Change|
I’m thinking back to 2017 when most analysts were predicting perhaps a 2% drop in 2018 in total market share due to cord cutting. Since 2018 is only the second year with real evidence of cord cutting, the 4% loss of total market share demonstrates big changes in customer sentiment.
The big losers are the satellite companies which lost 2,361,000 customers in 2018. These losses are offset a little bit since the satellite companies also have the largest online video services. Dish’s Sling TV added 205,000 customers in 2018 and AT&T’s DirecTV Now added 436,000 – but the net customer loss for these companies is still 1.7 million for the year.
In 2018 Comcast and Charter didn’t fare as poorly as the rest of the industry. However, their smaller loss of cable customers is probably due to the fact that both companies saw more than 5% growth of new broadband customers (2.6 million in total) in 2018, and those new customers undoubtedly are shielding cord cutting losses by older subscribers.
It’s still too early to make any real predictions about the future trajectory for cord cutting. We know that price is a large factor in cord cutting and cable providers are still facing huge price increases in buying programming. That will continue to drive cable prices higher. The big cable companies have done their best to disguise recent price increases by shoving rate increases into local programming or sports programming ‘fees’. However, the public is catching onto that scheme and also can still see that their overall monthly payments are increasing.
It’s starting to look like online programming might cost as much as traditional cable TV. For the last few years there have been alternatives like DirecTV Now, Playstation Vue and Sling TV that have offered the most-watched networks for bargain prices. But the recent big rate increase from DirecTV Now is probably signaling that the days of subsidized online programming are over.
Further, the online programming world continues to splinter as each owner of programming rolls out their own online products. The cost of replacing what people most want to watch online might soon be higher even than traditional cable TV if it requires separate subscriptions to Disney, CBS, NBC and the many other new standalone packages that a cord cutter must cobble together. A family that really wants to save money on TV has to settle for some subset of the online alternatives, and the big question will be if households are willing to do that.
But at least for now it looks like cord cutting is roaring ahead. The average loss of traditional cable customers in 2018 is almost 300,000 per month, and the rate of loss is accelerating. At least for now, the industry is seeing a rout, and that has to be scaring boards rooms everywhere.