Month after month, hundreds of thousands of cable TV subscribers keep closing their accounts. Roughly a half-million subscriptions were canceled in the second quarter of 2011 alone. Even so, there’s an argument that 2011 isn’t shaping up as “the year of the cord cutter” as originally forecast. A “cord cutter” is generally thought of not as someone who merely cancels cable, but who cancels and then replaces it with some combination of Netflix, Web TV, and other online entertainment. For the most part, this isn’t what the masses canceling cable are doing.
The people canceling cable lately are doing so not because their interests are turning online, but because they’re too poor to cover the monthly bills. It’s the economy that’s to blame for the rise in cancellations, not the idea that the classic bundled cable TV package is a poor value compared to the many other entertainment options offered to consumers today.
Or at least that’s how Big Cable is spinning the new data. All Things D reported that Time Warner Cable—which is somehow related to a news magazine and website I’m vaguely familiar with—lost 128,000 video subscribers in the third quarter of 2011. Executives say subscriber numbers are down due to the economy, not because people are trading cable TV for the Internet.
Likewise, the New York Times explains that there isn’t a widespread transition occurring regarding how people are getting entertainment:
Even as Internet video viewing increases, the vast majority of American households are still paying for television subscriptions and watching most video that way. Those who are canceling are doing so, it seems, because of poverty, not improved technology.
What with a rise in multi-generational homes due to the economy, there are fewer occupied residences and fewer newer homes being built—and therefore fewer households that could potentially be cable subscribers. In addition to straightup cancellations, cable companies are noticing a trend for subscribers to downgrade their TV package or cut back on premium channels or DVRs to trim monthly bills. These are all indications of how the struggling economy is affecting consumers.
This is noteworthy because over the summer, cable executives said they weren’t overly concerned that people were too poor to afford pay for TV. During the recession, cable was one of the last expenses consumers scaled back on to try and make ends meet. Even though there has been a rise in cancellations recently, 100 million households have some pay TV service now, and that figure has remained relatively consistent over the past few years.
But isn’t any cord-cutting a bad sign for cable? Why does it make a difference that people are canceling because they’re poor, rather than because they’re leaving for the Internet? The answer is that, from the cable company’s perspective, a customer canceling because of poverty is someone who is likely to become a customer again in the future, once the economy improves. Someone who trades pay TV for the Internet, however, may stick with the Internet for good.
So, in a way, the awful state of the economy gives Big Cable reason to be optimistic.
Pay TV operators have also been given a dose of optimism due to the recent struggles of Netflix, which has jacked up prices and angered subscribers—and which suddenly isn’t quite as good, or quite as affordable, an alternative to cable as it once seemed.