At an industry event this week, cable executives laughed off the idea of large-scale “cord cutting,” or that Netflix and Internet video could one day replace their businesses. They also justified high prices charged for cable packages by pointing out that pay TV was one of the last expenses consumers cut back on during the recession. That just proves customers believe cable is such an amazingly great value.
According to Reuters, at least one executive, Time Warner Cable’s Glenn Britt, brought up the idea that the economy and a poor jobs market may, in fact, be making cable unaffordable to a large group of people:
“There clearly is a growing underclass of people who clearly can’t afford it,” he said. “It would serve us well to worry about that group.”
Others, including Time Warner CEO Jeff Bewkes and Viacom’s Phillipe Dauman, said that the cable business looked strong regardless:
Dauman said it was “remarkable” that cable was one of the last things that customers cut off during the recession and was a testament to the value that cable offered.
Even though that by the end of 2011, it’s expected that 1.6 million customers will have cancelled cable since 2009, concerns about cord-cutting and consumers turning en masse to Netflix and Internet TV for entertainment were largely shrugged off.
In a PC Mag post about the event, executives said that cable need not fear the Internet encroaching on its business interests. For that matter, companies that use the Internet should be thanking cable for making the web what it is:
“We super-sized the Internet [by pushing] aside dial-up [for an] always-on experience we now take for granted,” Michael Powell, newly appointed president of the National Cable & Telecommunications Association, said in a separate speech. “Our continued investments … have made it possible for great Internet companies like Google, Amazon, and Facebook to come of age.”
While the Internet and cable now work hand in hand, it seems at some point the relationship will shift more into a true competition than today’s mostly buddy-buddy, plenty-of-money-to-go-around state of affairs. The change will happen quicker as consumers increasingly feel either that they’re not getting their money’s worth in their monthly bills, or that they just plain have too many monthly bills. The Reuters piece quoted a Berstein Research analyst named Craig Moffett, who called big cable a “rigged game” and said it was only a matter of time before even more customers cut the cord:
“That has been a wonderfully attractive model for a generation, but the danger, of course, is that eventually the video product will be priced into irrelevance for lower income consumers,” said Moffett. “I don’t know when it will happen, but I suspect we’re already perilously close.”
This may sound lame, but in this situation I sorta agree with a lot of what everybody here is saying. Is cable a “rigged game”? Sure. Has the Internet spread partly due to the help of the cable companies? Yep. Will Netflix or Internet TV be replacing cable anytime soon? Very unlikely. Is cable becoming unaffordable for a significant portion of the population? Indeed. But will large numbers of customers cancel cable because it’s out of their budget? Nope.