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article imageRaising prices and more ads won't end cord cutting

By Ken Hanly     Mar 9, 2018 in Entertainment
During the last decade cable providers have been slowly losing subscribers as many customers cut the cord and use streaming video competitors such as Netflix and You Tube or Roku and many others.
Cable executives refuse to take the trend seriously
Often the trend is either ignored or its is regarded as not serious. The defections were to a considerable degree caused by the costs of subscriptions. Often subscribers paid for channel bundles that contained channels they did not want. Opting for streaming alternatives was attractive and much cheaper.
The response was to increase subscription prices and the number of ads to try to make up for lost revenue.
Those who cut the cord were not worth keeping
After ignoring the trend for several years and pretending it was not happening, the industry then explained that those who were cutting the cord were not worth having as subscribers anyway and the trend was an annoying fad and would soon stop. Those cutting the cord were not tech savvy young people as some assumed but poor older people.
An article in Techdirt describes the earlier reactions: "First, they pretended it wasn't happening at all, and that they had somehow "beat" the internet (based on a single anecdote of someone who had dropped cable, but gone back to it a year later). Then, when news came out of massive numbers of people dropping their cable TV plans, they said that they weren't really cord cutters, because they were only canceling service due to the down economy."
The extent of lost subscribers
The trend towards cutting the cord is accelerating rather than slowing down. The research firm MoffetNathason Research notes that during the fourth quarter of last year the pay TV sector lost 500,000 subscribers. Satellite providers were badly hit with Dish and Direct TV losing 268,000 subscribers between them just in three months of last year.
The 3.4 percent decline in pay TV customers was the highest rate since the trend began accelerating back in 2010. It was also up from the 2 percent decline in the fourth quarter of 2016 and the one percent decrease in 2015.
The "cord never" group
A number of people, the "cord never" group, many of them Millennials grew up without ever subscribing to cable TV but watch Netflix or You Tube or use streaming devices such as Roku. Traditional TV is regarded as expensive and archaic. These people are also a significant reason the number of pay TV subscribers is declining. If they had subscribed the pay TV providers would have more subscribers.
Cable companies confident because of large base of subscribers still
There are still 83 million households that subscribe to traditional cable. This may give cable executives the false notion that they can milk their cash cow forever. However, as reported in a recent Digital Journal article 40 percent of present pay TV subscribers will have cut the cord by 2030.
Some companies are beginning to recognize the trend
A recent article at Motherboard goes into detail as to how cable companies reacted to the trend by increasing ads and subscription prices.
Some companies are finally coming to the conclusion they need less rather than more advertising. Fox is trying to reduce ad time to just two minutes per hour by 2020. Ed Davis a Fox executive said:“The two minutes per hour is a real target for Fox, and also our challenge for the industry. Creating a sustainable model for ad-supported storytelling will require us all to move.”
Comcast NBC Universal also claims it will reduce advertising by as much as 20 percent in commercial breaks, and by 10 percent in prime time programming. Yet Comcast is increasing prices for this year a move likely to lose it subscribers. Rather than face the fact that they need to compete with streaming services many cable companies are looking for new ways to raise revenue and put obstacles in the way of their streaming competitors. They might do better if they concentrate on offering a cheaper and better alternative product and accept the fact that their profit margins will be less.
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