Editor’s Note: This is a guest contribution from David Mumpower of BoxOfficeProphets.com. David is an entertainment and tech junkie who follows the changing television landscape, but who hasn’t become a full-fledged cord cutter yet.
As someone who has yet to cut the cord, I still have almost-constant interactions with my cable company. The reason why is that we have a jinxed account. For 15 years now, we’ve fallen victim to any number of mistakes caused by a corporate indifference and lousy infrastructure. Our local office branch refers to ours as the Cursed Account. I’ll give you a recent example.
In March of 2015, I spoke with someone who claimed to be a Vice-President from my cable company. That’s how you can tell just how much they’d screwed up my account. This person gave me a personal guarantee that they’d lock in the rate they promised on the phone. For 12 months, I’d never have to pay more for my cable service. In May, I received a bill. You can guess what happened next.
Yup, my payments had increased by over $30, which is a price hike of more than 20 percent. Now, I argued, cajoled, and threatened to cancel. After the first several layers of “customer service” called me a liar for having the audacity to insinuate that my bill would remain static. Eventually, a person from the local office read our account history, which is basically the cable bill answer to The Exorcist, and they corrected the manner as best they could, which I sincerely appreciate. Still, the story embodies an unfortunate reality of cable television.
A new survey from Digitalsmiths has found that 60.7% of cable subscribers now have a total monthly bill (includes internet and phone if bundled) over $100. That’s 3.3% more people paying over $100 each month than two years ago. And 23.9% of subscribers have a bill that’s a whopping $151 or higher.
Building a Culture of No
Large corporations train customer service entry level support staff to say no. They combine this strategy with a pricing tactic wherein the cost of doing business operates on an escalator. You get in on the ground floor, and then it rises constantly even though what you want stays the same. The same channels you originally purchased continue to cost more even as your viewing behavior evolves, guaranteeing that you watch the programs less.
Make no mistake on the point. Cable companies understand the changing economics of their business. Rather than address the issue in a reasonable fashion by learning new consumer behavior and capitalizing on emerging revenue opportunities, these businesses have gone an entirely different way. They’re making their most loyal customers, the ones who haven’t cut the cord yet, pay more to make up the difference for the money lost when others did. It’s as maddening as it is short-sighted and desperate.
So Many Cords Cut
Research released at the start of December indicates just how much non-cord cutters are suffering due to the ill-considered business practices of cable carriers. Let’s start with the why of the matter. Digitalsmiths, a TiVo company, tracks changing video consumption behavior with regards to cord cutting. Their most recent survey revealed that almost 20 percent of the people they interviewed without cable subscriptions had canceled service during the past 12 months.
Notably, there’s an increase of roughly 12 percent in people watching over-the-air (OTA) broadcasts, bringing the total of cord cutters who use HD antenna to 45 percent. We can glean from this information that people DO have some desire to watch television via conventional means. There’s simply a limit to how much they’re willing to pay for it. Clever businesses seeking to disrupt can and do target these disenfranchised television viewers. Sling TV’s service is a blueprint example of enterprising people seeing opportunity while less savvy, larger businesses are slow to react to changing circumstances.
Paying for 170 Channels You Don’t Watch
That’s important to note, because the numbers suggest that cord cutting is about to hit critical mass, no matter what corporate naysayers may say when they report “lower-than-expected cable-TV losses“. Yes, that’s the equivalent of saying that you failed a test by much less than you expected. And the numbers don’t even support the attempt at damage control. The Digitalsmiths data suggests that 46.5 percent of current cable customers are weighing their options. These clients intend to reduce service, change to a cheaper carrier, or cut the cord altogether. There’s a reason Comcast is now offering its own answer to Sling for cord cutters, and it’s because newly empowered customers are weighing their options.
Historically, cable services involved tiers that forced people to pay for channels they don’t use. The numbers are truly staggering. Nielsen is the end-all/be-all of television ratings gurus. Their research suggests that the average cable user has access to 189 channels, but viewers watch only 17 on a frequent basis. That means you’re paying for more than 170 channels you don’t need. And if you’re not a sports fan, you probably don’t even want to know how much ESPN increases your bill each month.
The Abolition of Tiers
In the era of over the top (OTT) services, such concepts are archaic. People can direct-dial many of the channels they want, and the list is growing each quarter. Even network channels like NBC and CBS recently added OTT apps for fans.
In other words, cable companies are selling products the same way that they did 25 years ago. Meanwhile, savvy customers have shifted the way that they consume media as well as the ways they expect broadcasters to air their content libraries. In the same survey, 48.2 percent of responders said they would keep cable if only the companies demonstrated a bit of forward-thinking about their products. All people suggest that they need to stay loyal is better functionality to discover new programming during this, the golden age of television.
That number is even larger than the number of people who say they’re considering a change in cable service, which means that some of the people who indicated they’re not thinking about cutting the cord actually are. They just don’t realize it! Taking the survey made them appreciate how frustrated they are with the current cable consumption process, which has to be terrifying news to businesses like Comcast and Time-Warner.
Guess Who Gets Stuck with the Bill?
How does this data impact people who haven’t cut the cord and aren’t considering it? Well, they’re taking it in the wallet to a dramatic degree. More than 60 percent of responders during the third quarter of 2015 suggest that they pay in excess of $100 a month for cable service. Almost a quarter of those surveyed indicate that their bill is more than $150 a month, which is $1,800 a year. If that doesn’t make a subscription to Netflix seem like a deal, I don’t know what will. The scary part is that prices have ticked up 3.3 percent over the past two years, and there’s no end in sight.
In most businesses, a loss of customers would cause a company to re-focus on the quality of their offerings. They’d also lower the price of doing business in order to show gratitude to the customers whose money keeps the lights on. Cable carriers…are going a different way. Due to the escalating cost of paying cable channels such as ESPN, Disney Channel, and TBS/TNT, these corporations are testing the price elasticity of their clients. The idea is that they can keep raising prices as long as the financial gains accrued exceed the losses from people who cancel due to the increased service cost. It’s a wonderful example of something that makes sense on a spreadsheet but is a horrible idea in practice.
Again, this IS the golden age of television. It should be easier than ever for broadcasters to monetize quality programming. They’re losing customers due to a combination of failure to react to the new competition of OTT options and simple corporate arrogance. The statistics bear out the latter point. 24 percent of current cable TV viewers describe themselves as unsatisfied with their service. If one out of every four of your clients is unhappy, you’re doing too much wrong. This is precisely why 63 percent of pay TV users haven’t determined if they’ll still have service in a year.
Simply stated, cable television is suffering from self-inflicted wounds. Every few weeks, new research strongly suggests that cable conglomerates should alter the way that they do business before it’s too late. The fact that nothing ever changes explains why so many experts believe that cable TV is dying.
Oh, and here’s some proof that these companies deserve to wither away. Comcast just announced that they’re raising rates for most of their customers by an average of 3.9 percent at the start of 2016. And that’s why no one will mourn your death, Comcast (and other major cable providers).