Cable Operators Keeping the Wolves at Bay
Cable TV operators are keeping the wolves at bay it seems with their latest initiatives to retain customers. A new survey from PricewaterhouseCoopers (PwC) shows that cord-cutting—cancelling cable TV subscriptions—was fairly stable in 2016 at 23 percent, compared to 21 percent last year. What’s more, a greater number of consumers (84 percent) anticipate keeping their pay-TV subscriptions for at least the year, compared to 70 percent in 2015.
In other words, cord-cutting has slowed more than was expected based on 2015 data. The slowdown is attributed to new offerings from cable TV operators that encompass slimmed-down, or “skinny,” streaming bundles, as well as on-demand and other video options. All of the major cable providers have introduced some version of skinny bundles to appeal to customers weary of paying high prices for the most popular TV packages.
These new findings don’t mean that the threat to pay-TV providers is going away, but they may spell a reprieve. Based on its analysis, PwC believes that streaming services will continue to grow as additions—not replacements—to pay TV packages. The consulting firm noted that more subscribers are customizing their pay-TV bundles through trimming, even as they consume more content than ever before.
Curated bundles of on-demand services, however, can become pricey. Case in point, of the subscribers who opted to scale back last year, 51 percent ended up paying more for video content than they did a year ago (compared to the 42 percent of all U.S. consumers who said they pay more now for video). Sixty-eight percent of those who dropped their TV packages entirely said they were paying less now.
While rising costs are the reason most consumers reduce or drop their TV subscriptions, according to PwC, the growing popularity for a new generation of high-quality video, along with live TV, is reducing price sensitivity.
Nevertheless, since 2013, when the multichannel TV providers, including cable TV operators, posted their first full-year decline in subscriptions, cable executives have worried about a continuing downward trend. Helping them hold onto their year-over-year growth were their legions of customers who enjoy live programming.
Yet, enhanced offerings from video streamers and other online media continue to push more TV viewers to scrap their monthly cable bills. In fact, PwC reports that the number of pay-TV subscribers among its 1,200 survey respondents is down from 79 percent in 2015 to 76 percent this year.
In its quarterly cord-cutting report, research firm MoffettNathanson found that pay-TV losses for the third quarter of $455,000 were “only a tad worse than last year’s,” echoing the trend found in PwC’s study.
But next year will be a key test of the resilience of the bundle, as the expected launch of streaming options from such players as AT&T (with DirecTV Now) and Hulu (with its virtual MVPD service) offer consumers even more options.
Even though cord-cutting has stabilized—at least for 2016—cable revenue is likely under pressure, according to the survey. A majority of households, 58 percent, said they were spending less on video content than they spent a year ago.