Cable Customers Continue to Plummet – 3Q 2019

The number of traditional cable TV subscribers continued to plummet in the third quarter of 2019. The numbers below come from Leichtman Research Group which compiles these numbers from reports made to investors, except for Cox which is estimated.

The numbers reported are for the largest cable providers and Leichtman estimates that these companies represent 93% of all cable customers in the country.

For the quarter, the large cable companies lost 2.1% of subscribers which would equate to a trend of losing 8.4% for the year. However, that number needs to be put into context. The biggest drop of customers came from AT&T / DirectTV which lost nearly 1.3 million customers in the quarter, and 2.6 million customers so far this year. Much of AT&T’s loss comes from the decision to end discount plans to customers and has been letting customers go who won’t agree to pay full price at the end of previously given discount plans. The company says they are glad to be rid of customers who were not contributing to the bottom line of the company. All of the other providers collectively lost 0.9% of market share for the quarter, or a pace of 3.8% annualized. It appears the many of the lost DirecTV customers didn’t reappear at another cable provider and are gone from the industry, and so AT&T seems to be pushing households to cut the cord perhaps earlier than they might have otherwise. The nearly 1.8 million customer loss for the quarter sets a new record for cord-cutting.

Following is a comparison of the second and third quarters of this year:

3Q 2019 2Q 2019 Change % Change
Comcast 21,403,000 21,641,000 (238,000) -1.1%
DirecTV 16,828,000 17,901,000 (1,073,000) -6.0%
Charter 16,245,000 16,320,000 (75,000) -0.5%
Dish TV 9,494,000 9,560,000 (66,000) -0.7%
Verizon 4,280,000 4,346,000 (66,000) -1.5%
Cox 3,900,000 3,940,000 (40,000) -1.0%
AT&T U-verse 3,600,000 3,704,000 (104,000) -2.8%
Altice 3,223,400 3,255,300 (31,900) -1.0%
Mediacom 729,000 747,000 (18,000) -2.4%
Frontier 698,000 738,000 (40,000) -5.4%
Atlantic Broadband 312,555 307,261 5,294 1.7%
Cable ONE 298,063 308,493 (10,430) -3.4%
Total 81,011,018 82,768,054 (1,757,036) -2.1%

Some other observations:

  • Frontier continues to bleed and lost 5.4% of its cable customers along with 71,000 broadband customers in the second quarter.
  • Several other companies – Mediacom, and Cable One lost more than 2% of their cable customer base in the quarter.
  • The rate of loss for Dish Networks continues to shrink, and this might be due to picking up customers that are leaving DirecTV.

I haven’t seen anybody tracking the quarterly performance of all of the online cable equivalent providers – the companies that carry a full line-up online. It seems unlikely from the numbers I have seen that these companies are picking up a lot of the customers leaving traditional cable TV. For example, Leichtman reports that Sling TV picked up 214,000 customers in the third quarter while DirecTV Now lost 195,000 customers.

I have to wonder at what point the cable industry will start to implode? Cord cutting is accelerating. The popular press and social media are full of advice telling people to cut the cord. There are major new online content platforms like Disney+, HBO Plus, and Apple + that are providing additional justification to cut the cord. Advertising revenues are starting to drop along with subscriber revenues.

There must be drastic changes in industry practices if the traditional cable business is to survive. Continued price increases are pushing cable TV out of the range of affordability for most homes. To survive, the cable companies and the programmers would have to get together to reform the industry with affordable products people are willing to buy. At least for now, that possibility seems remote.

Can Big ISPs Resist Data Caps?

MagneticMapI think we can expect data caps to continue to be in the news. Comcast was getting a lot of negative press on data caps at the beginning of the year and had generated tens of thousands of complaints at the FCC from their 300 GB (gigabit) monthly data cap. They relieved that pressure by unilaterally raising all of the data caps to 1 TB (terabit) per month. But Comcast has now been quietly implementing the terabit cap across the country and recently activated it in the Chicago region.

In May of this year, AT&T U-verse revised a few of their data caps upward, but at the same time began seriously enforcing them for the first time. Until recently, most AT&T data customers that exceeded the caps paid no extra fees. The AT&T U-verse data caps are much smaller than the new Comcast cap. For traditional single-copper DSL customers the data caps is 150 GB per month. For U-verse speeds up to 6 Mbps the cap is now 300 GB per month. For speeds between 12 Mbps and 75 Mbps the cap is 600 GB, while customers with speeds at 100 Mbps or faster now have the same 1 TB monthly cap as Comcast. AT&T has a kicker, though, and any customer can buy unlimited usage for an additional $30 per month.

The large ISPs, in general, are under a lot of pressure to maintain earnings. They have all profited greatly by almost two decades of continuous rapid growth in broadband customers. But that growth is largely coming to an end. A few of the cable companies are still seeing significant broadband growth, but this is coming mostly from capturing the remaining customers from big telco DSL.

At the beginning of this year, the Leichtman Research Group reported that 81% of all American homes now have a broadband connection. When you add up rural homes that can’t get broadband and those elsewhere that can’t afford full-price broadband, there are not room for much more growth. Even if a lot of low-income households get broadband through the Lifeline Fund subsidies, those customers will be at low rates and won’t do a lot to the bottom line at the big ISPs.

Meanwhile, the large ISPs are seeing an erosion of cable revenues. While cord cutting is small, it is real and the cable industry as a whole is now slowly losing customers. Probably more significant to their profits is cord-shaving; customers cut back on the cable packages to save money (and because they have alternatives to the big cable packages). Even if cable wasn’t starting to bleed customers, the margins continue to shrink due to the huge increases in programming costs. Even high margin revenue streams like settop boxes are under fire at the FCC.

When I look out five years from now it’s obvious that the ISPs will somehow have to milk more profit out of broadband. There are only two ways to do that – increase rates or find backdoor ways like data caps to get more money from broadband customers.

It’s not hard to understand why the large ISPs fought net neutrality so hard. By putting broadband under Title II regulation the ruling has already started to impact their bottom line. I think Comcast raised their data cap to stop the FCC from investigating data caps. The proposed FCC rules on privacy will largely strip the ISPs of the ever-growing revenues from advertising and big data sales. And it’s certainly possible in the future that the FCC could use the Title II rules to hold down residential data rates if they climb too high.

It’s got to be a bit hard to be a big ISP right now. They look at envy at the big revenues that others are making. The cellular companies are making a killing with their stingy data caps. Companies like Google and Facebook are making huge amounts of money by using customer data for personalized advertising. Meanwhile, the ISPs live in a world where, if they aren’t careful, they will eventually become nothing more than the big dumb pipe provider – the one future they fear the most.

Comcast, and perhaps the new Charter, are large enough to find other sources of revenue. Comcast is now pursuing a cellular product and has done fairly well selling security and smart home products. Comcast also makes a lot of money as a content provider, boosted now by buying DreamWorks. But any ISP smaller than these two companies is going to have a nearly impossible time if they want to continue to match the growth in bottom line they have enjoyed for the last decade.