US cable TV bleeds subscribers as online grows

The new Sony Internet TV pictured at its unveiling in New York City, October 2010
The new Sony Internet TV pictured at its unveiling in New York City, October 2010. According to a study released last week by consulting firm Frank N. Magid Associates, only one percent of US consumers have cancelled their television subscription in favor of accessing content available on the Web and only 2.5 percent of consumers use Internet content exclusively.

The economic downturn has US cable television companies shedding subscribers in record numbers and Americans increasingly "cutting the cord" in favor of cheaper online options, new research shows.

The findings point to a growing pool of potential customers for online services such as Hulu and Netflix and newcomers like Apple TV and Google TV, which offer lower prices and more flexibility, analysts say.

According to research firm SNL Kagan, US lost 741,000 basic video customers in the third quarter of the year, the biggest decline since it started tracking the segment in 1980.

Comcast, the largest US cable operator, lost 275,000 video subscribers during the third quarter while , the second-largest, shed 155,000 video customers in the July-September period.

The pay television sector -- which includes and TV services offered by telecom firms in addition to cable -- lost 119,000 customers in the quarter after gaining 346,000 a year ago, SNL Kagan said.

Combined with a loss of 216,000 customers in the second quarter, the first ever decline in its history, the pay television segment has fallen 2.3 percent in the last six months to around 100 million subscriptions, it said.

Cable television executives have pinned the blame for the unprecedented losses on high unemployment and the recession.

"I think there's much ado about very little in terms of all the talk about cord cutting," Philippe Dauman, president and chief executive of Viacom, told financial analysts on the television titan's latest earnings call.

"We don't see cord cutting as affecting our business," said the Viacom chief, whose properties include cable networks Comedy Central and MTV.

"I think it's remarkable that in the teeth of a powerful recession that we went through that continued viewership of subscription television held up as well as it has," Dauman added.

"And as the economy recovers we expect to see the number of television subscribers in the US grow at a better clip than it has over the last year and a half or so."

As for Netflix, Dauman said it has "positioned itself, not as being a substitute for television viewing but as a complementary service, and that is the way it is being used."

claims over 16 million members in the United States and Canada and last week unveiled a 7.99-dollar monthly plan that allows unlimited streaming of movies and television over the Web.

Hulu, which is owned by The Walt Disney Co., News Corp. and NBC Universal, recently introduced "Hulu Plus," which offers online viewing of recent television episodes, also for 7.99 a month.

While penny-pinching in hard times is behind the decision of many Americans to abandon pay television, industry analysts said there are signs that some are replacing cable with the newly available online options.

"It is becoming increasingly difficult to dismiss the impact of over-the-top substitution on video subscriber performance, particularly after seeing declines during the period of the year that tends to produce the largest subscriber gains," said Ian Olgeirson, senior analyst at SNL Kagan.

Jeff Kagan, a telecom industry analyst who shares the same name but is not affiliated with SNL Kagan, said a number of factors were behind the drop in cable subscribers, including the inability to buy channels a la carte.

"In order to raise rates annually, the cable television industry always adds more channels and says it is still a good deal," Kagan said.

"However, the average customer still watches the same 10 to 15 channels," he said. "Adding more channels and charging more does not make it a better deal... It just makes it more expensive."

Kagan said US consumers have lived with costly monthly cable bills for years because they had no choice but "now things are changing."

"Suddenly there is competition in many markets from satellite television companies and the IPTV services from phone companies," he said. "Suddenly the economy is rough and people increasingly want to save money.

"Suddenly there are new services that are popping up like TV and Apple TV and more, taking us away from traditional television," he said.

"The customer finally had enough," Kagan said. "Now with choices they are making their move."

While some undoubtedly are, they remain a tiny minority for now.

According to a study released last week by consulting firm Frank N. Magid Associates, only one percent of US consumers have cancelled their television subscription in favor of accessing content available on the Web and only 2.5 percent of consumers use Internet content exclusively.

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User comments

Nov 28, 2010

Don't waste it though, call them and tell them it's because of the on screen permanent logo display.

Nov 28, 2010

Don't waste it though, call them and tell them it's because of the on screen permanent logo display.

I'd rather say it's due to the horrible service I get from them. Then again, my cable company is my internet provider. Catch-22.

Nov 28, 2010
I use DSL for everything. When America switched to HD TV, I got rid of my old TV and haven't looked back. Sometimes I have glitches while video streaming, but the hassle is minor. TV is dead -- it just doesn't know it yet.

Nov 28, 2010
The only problem is sports!!! If I could watch live sports on the internet the way I can on TV, I would give up my subscription today.

Nov 28, 2010
Do we really think cable companies that also provide our internet are going to lose money? They'll simply make us pay for bandwidth usage.

The end of "broadcasting" and the dependence on Internet for information and news is here.

Pay, pay, pay and pay some more. Why have antenna broadcast systems when we can make them pay!?! Then we can steal those airwaves for other things to make them pay, pay, pay more money to use.

Nov 28, 2010
You don't need the cable co for internet, there is DSL. The cable companies already have all their infrastructure in place and the price isn't going down, probably never will. Their infrastructure is co-ax and the bandwidth is limited. The phone companies are still putting their infrastructure in place, fiber. I hope they will lower their prices eventually while getting faster. I wouldn't invest in a cable company.

Nov 28, 2010
I don't pay for cable, nor internet. I used to pay for internet, now I just borrow it from unlocked routers.

Nov 28, 2010
The cable tv monopoly has always been about bundling 99% garbage with the 1% of things you would actually consider watching, and in the most expensive and inconvenient way possible. Just like the current business model the music industry is using litigation to bitterly cling to, it is time for this type of exploitative entity to die out.

Nov 28, 2010
*waves hand*

I'm someone who dropped cable for Hulu/Netflix. (More accurately, I dropped cable when I became a casualty of the recession. Things have improved; but I have not switched back, and don't plan to ever.)

I admit that I do miss the CBS and the Discovery/History/Science/NatGeo channels; but that stuff is not worth $80/month.

An a la carte option MIGHT bring me back. But, to be honest, I don't think we really even need "channels" any more. This occurred to me after I only recently realized that Fringe is, in fact, from FOX and not ABC.

I used to watch hours and hours of TV every day. Now I only bother with the "creme de la creme" and do more productive things with the rest of my life. The idea of going back to paying an unjustifiable amount for the dozen-or-so channels I watched, and grumbling about all the crap I also had to pay for, is laughable.

My advice, get an all-in-one mini PC with HDMI out and a wireless keyboard with a little trackball in the corner. It's heaven.

Nov 28, 2010
4G wireless will soon be another viable option for internet service. Cable companies may be tempted to shift profits from cable TV to cable internet but they can only raise those prices so much. I personally hope some of these cable companies (like TWC) pay dearly for lack of upgrades and overcharging over the years.

Nov 28, 2010
I haven't had cable or any type of "pay" TV for about a decade now. Break the habit. 350 channels of drivel is just lowering your IQ. Read a book, instead. ;)

Nov 28, 2010
I find non-interactive media so mind-numbingly slow paced. How can people sit through a TV show? The pace is insulting, the outcomes are trite, and it's ultimately just a regurgitation of something you've already seen 50 times in the past.

Read a book, instead. ;)

Best goddamn advice I've heard in a long time.

Nov 29, 2010
Allow me to describe Canada's sad internet situation (it's an alternate system.. almost like a second opinion, no?).

In Canada, internet service 'competition' is between the same companies that offer cable (Rogers cable) and satellite (Bell DSL - historically telephone) television service. For their internet offerings, they offer stupidly low bandwidth caps and throttle any detected P2P traffic.

Someone paying for standard (insufficient for regular video streaming at 60GB combined up/down per month) internet service and a standard cable package can expect to pay about $40+$70=$110 per month. The trouble is... If the bandwidth caps were raised to make television streaming practical, would people still be willing to shell out $110 for increased speed, or would they be satisfied with the video and internet service they could get for $50? It is more profitable for them to cripple their internet service so that people pay for television separately, and no one is willing to stop them.

Nov 29, 2010
Bandwidth disparity seems to be the operating premise of this entire market. Here in southern california the average download speed with time warner is around 6Mbps. Go look at manhattan, ny. They can get 50mbps lines. I'd have to get 5 premium (10mbps) service bundles here in LA and multiplex them with 100% efficiency to match that.

I know backwater quagmires get stuck without broadband, but this is los angeles. WTF?

Nov 29, 2010
bravo, alec123456. Finally catch on four years later :)

Nov 29, 2010
I'm going to paraphrase one of my comments from a similar article. Internet is more versatile. you can play games online, watch tv (on demand,when I want), check out more classic websites like physorg,check the weather instantly, check the news stories in the order you want, watch pornography for free(I say this because cable charges 10 dollars a month for a softcore channel like cinemax)and use your internet connection for making VOIP calls.

Nov 30, 2010
well, i definitely saw this coming.... the funny thing is, if you know where to look online; if you know the right sites, blogs, &/or forums to go to, then you don't even really need to subscribe and pay a monthly fee online to watch all your favorite shows the same night they come out - usually as fast as even within an hour or so after it plays!!! that way you can download or stream your favorite shows for free, and all your paying for is your internet service bill! the only monthly payment you might want to make, if going with that route, after you've found all the best sites to follow from now on, after you get yourself setup, to get links from everynight... well, this is more of a preference, since there's plenty of other sites & links given that you don't have to do this, but i exclusively use megavideo/megaupload since its the best quality usually and easiest to use. you can use it & download for free, but if so, when streaming, it does have a time limit. but ya - it's great! :)

Nov 30, 2010
...and in addition to my post, just so you know that this is not what i was talking about, so you guys don't misunderstand me; "JUST SAY NO TO TORRENTS!!!" that's the wrong way to watch shows online for free without having to pay a monthly fee. not only is that a huge way people get destructive viruses, but it's also the #1 way they can track people, and it also forces you to share your own files from your computer, thus ending up making the whole process illegal... so, like i said, don't misinterpret what i was saying, cause all i was talking about were sites that just provide video links online that are streamable (usually). so, again, like i said before; "JUST SAY NO TO TORRENTS!!!" but yea, aside from the dreaded torrents, like i also explained above, there is a way to not have to pay anything to watch the shows you love and want to watch every night... you just gotta know where to look. ;)

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