Friday, October 20, 2017

Cutting the Cord - Again

The WSJ is reporting that AT&T is losing traditional cable TV customers.
AT&T said in a securities filing late Wednesday that its video-subscriber base declined by about 90,000 customers in the third quarter as customers abandoned its fiber-optic-video and satellite-TV services. The decline, its third quarterly drop in a row, came despite nearly 300,000 new accounts on its DirecTV Now service, which streams channels over the internet.

Other cable TV providers are also losing their higher-margin subscribers to cheaper Internet streaming services. Streaming services continue to create content bundles similar to the traditional CATV bundles that appeal to consumers.

Moreover, this increased downstream competition is forcing content providers to negotiate lower prices to content distributors.
Shares of media companies also fell. AMC Networks Inc. lost 6.8%, Viacom Inc. declined 2.5% and Walt Disney Co. slid 1.6% on Thursday after Guggenheim Securities analyst Michael Morris downgraded the stocks. "We expect pressure on subscriber trends and audience size to continue for the foreseeable future" across the entire sector, he wrote.

For those of us old enough, this has a familiar ring to it. One of the FCC's policy goals in the 1990s was to increase competition for the local telephone telephone monopolies. However, it was difficult to get anyone to invest in stringing new wires to each household. A few foresaw that the growth mobile phone industry would lead to 'cord cutting' by millions in the US (and provide service to billions worldwide).


  1. Consumers have many choices when it comes to watching TV and movies that suit their preference, budget, and needs. The day where TV is satellite or cable are long gone and the industry is very competitive. The industry offers internet and the ability to tailor as little or as much as you'd like. There is live streaming like Hulu, on demand streaming like Netflix. Consumers like convenience and to be able to watch what they want and when they want to.
    It makes sense that AT&T is losing customers as some don't like to lose signal in a storm and now there is a marketplace where consumers have other choices. People are cost sensitive and like products that address their needs and don't wish to pay for what they don't. There is also an internet version of Direct TV that consumers may shift to due to convenience and cost that will take customers from the satellite version. More importantly, the revenue and profits from a service like DIRECTV Now can't make up for the loss of its satellite subscribers. DIRECTV Now starts at just $35 per month, while satellite customers pay closer to $100 per month when you factor in all the extra taxes and fees. AT&T will argue that the overhead on the streaming service is much lower, as there's no installation or hardware cost and lower customer acquisition expenses. But that only begins to offset the matters of minuscule gross margin and lower revenue. (motleyfool)

  2. Most of the stuff on TV is trash. Ads are violent or sexual even in the morning and afternoon. We stopped watching TV about 7 years ago except the local weather and maybe 5 mins of local news a day. We watch Blu-Ray and read books. My 3 kids are straight-A students and the best part is, they haven't adopted any urban slang in their speech patterns.

  3. You would think that as a substitute product became available in the cable industry, for customers to use the internet to stream shows and movies either for free or a minimal monthly fee, that cable companies would respond by lowering prices. Yet they did the exact opposite, to keep profits they raised prices for their remaining customers to cover the loss of revenue from the cord-cutters. Loyal customers to the cable companies are rewarded with ever increasing prices for the same product. To make it even worse, their promotional strategy is for new customers to be offered a one year promotional rate to entice them to sign up, but if existing customers try to reduce their bill, they get the runaround from customer service.
    Cable companies forget that competition erodes above-average profit in the long-run. The positive profits they once enjoyed lead to entry to the industry by competitors, which then decreases price and profit. Cable companies have made minimal innovations to differentiate their product. Without product differentiation, the next best strategy to keep a sustainable competitive advantage is to focus on los costs and reduced prices. Cable companies are holding on to an outdated business plan, and if they don’t adapt they will become obsolete just like land line phones.