Over the last few years, cable and satellite companies have lost tens of millions of subscribers who have grown tired of seeing their monthly rates steadily rise. In 2019 more than 5.5 million people “cut the cord” with large cable and satellite providers, a huge increase over last year’s loss of 3.2 million customers. As TV companies pay more and more to produce and acquire new programming, they will likely keep raising subscriber rates on an already strained consumer base. “Cable companies have made peace with the idea of customers leaving if they want to,” said analyst Craig Moffett. “The companies will accept programming price increases and pass it onto consumers, accelerating the downward spiral of pay-TV.”

Americans who subscribe to cable or satellite providers primarily do so in order to watch live news or sports, both of which are expensive to produce. As a result, companies like Comcast make up for shrinking profit margins by raising monthly rates between 3 to 5 percent every year. “These cable companies are seeing very little margin, which is very frustrating to them,” said TiVo CEO Dave Shull. “The bundle is breaking down as a result of these massive price increases.” Other services like Sling that offer slimmer TV packages aren’t gaining customers either after raising prices as well. 

Television providers must also contend with the rising dominance of streaming platforms like Netflix, Amazon, and Disney+. Comcast plans to take on these competing services by launching its streaming platform Peacock later this year through NBCUniversal. And while the media giant is losing cable subscribers every year, Comcast is also gaining plenty of new customers to its broadband services. In the long term, cable companies will likely concentrate on serving this wide base of Internet consumers. Meanwhile, their pay-TV operations could dwindle to a small core of high-end customers who are comfortable with constant price increases. 

Questions:

1. Why did more than 5.5 million consumers cut the cord with cable and satellite companies last year?
2. How do cable companies like Comcast plan to compete against streaming platforms like Netflix and Amazon in the long term? 

Source: Lillian Rizzo and Drew FitzGerald, “Cord-Cutting Accelerated in 2019, Raising Pressure on Cable Providers,” The Wall Street Journal, February 20, 2020. Photo by Daniel X. O’Neil.