Millennials Are Leading The Charge.
According to the Financial Times cord cutters and cord nevers continued their exodus from both cable and satellite subscriptions in second quarter. This exodus took the form of 566,000 people saying goodbye to both cable and satellite subscriptions.
Even though this happened during a time which is historically bad (summer) for paid TV it also occurred while there is an upswing in new households being created. Now since baby boomers are no longer purchasing homes in large numbers or forming households this would mean that the millennial’s are the ones doing the forming. This does not bode well for cable since these are the folks should be picking up where the boomers left off and sustaining paid TV.
In all honesty though the amount of folks that left the cable companies was not earth shattering in cables view, since they have 100 million subscriptions in the US. This number though translates into a 0.7% year on year decrease and is the biggest on record. While it may not be an earth shattering amount of folks yet the trend is increasing.
Even harder hit than the cable companies were the satellite companies. The reason for this is that Dish and DirecTV do not offer Internet service as part of their core business. This could be a big part of the reason that AT&T recently absorbed DirecTV. The cable companies long ago figured out that even if you stream your TV from Netflix or Hulu you still need a good Internet connection to accomplish it and that is becoming a bigger part of their business.
As a way of bolstering this assertion we take note of Comcast that in the second quarter became a company that now has more broadband customers than paid TV. The problem with this for Comcast is that the profit margins on broadband are much lower than that on paid TV, which means they will have to make it up somewhere. This usually means raising prices everywhere. Raising prices can become somewhat problematical when the government steps in and says no you won’t.
So just what does all this mean? In my personal opinion it means that cable and satellite providers had best wake up and smell the coffee. This cord cutting trend will continue seeing as there next customer base for cable is the millennial’s and it doesn’t appear they have much interest in signing up for any type of subscriptions. Add to that the fact that the baby boomers are reaching an age where that customer base is beginning to decline.
Providing broadband service though will not save the day for these companies either due to the fact that there are many other ways of receiving Internet service underdevelopment. Just one of those ways uses hundreds of cheap, cookie-cutter satellites to beam Internet service anywhere in the world. Google is also proving themselves very successful in providing ultra-high-speed broadband to cities throughout the U.S. as they big up streets and lay new cables.
We look forward to this trend continuing seeing as is already pushing companies to provide a more à la carte service when it comes the TV. Two such innovations are Sling TV and HBO NOW which are recent attempts get some of the cord cutters back. As a matter fact sling TV is what kept the Dish Network from posting even larger losses in the second quarter that it would have otherwise.
Stay tuned I’m sure there is more to come.