What Cord Cutting? Cable Sector Hiked TV Prices 40% In Last Five Years

We've noted time and time again that the cable and broadcast industry could compete with cord cutting by lowering prices, it just chooses not to. Even with last quarter seeing the biggest quarterly defection by paying subscribers ever recorded, time and time again you'll see sector sycophants proclaim that cord cutting either doesn't exist, or has been violently over-hyped and isn't worth taking seriously. In fact, most sector executives still believe that the shift away from traditional cable will magically end once Millennials start procreating (protip: it won't).

As such, they've continued to raise cable TV rates at an absurd rate in the belief that they can keep milking the legacy cable TV cash cow in perpetuity. And while broadcasters certainly take the lion's share of the blame for raising the cost of programming, you'd be hard pressed to find a cable TV provider that isn't making things worse by also saddling consumers with misleading fees for nothing and soaring cable box, modem, and other hardware rental costs.

The end result is users paying 40% more for cable TV than they did just five years ago. In fact the average cable bill is now $103.10 per month, an increase of 4% in the past year. And while the cable sector is quick to proclaim that this just reflects the "increased value" of cable TV, the reality is that most cable ops are trimming back overall channels to try and offset the bloated, soaring cost of sports programming.

While it remains true that the vast majority still subscribe to cable TV and cord cutting is a slow trickling phenomenon, last quarter saw 800,000 pay TV customers leave for cheaper pastures. And things are actually a little worse than that when you remember that cable TV subscriber totals aren't scaling with a rebounded housing market. In other words, millions of people are not reconnecting cable after they move:

"About 82% of households that use a TV currently subscribe to a pay-TV service. This is down from where it was five years ago, and similar to the penetration level eleven years ago," said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. "The rates of those exiting the category, or intending to leave, are actually similar to recent years. The decline in penetration is also due to a lack of those who are coming into the category, and the industry not keeping pace with movers and related rental housing growth."

A different study this week predicted that TV providers could lose nearly $1 billion in revenue as another 800,000 customers cut the cord over the next 12 months:

The study, which is based on an online survey of 1,119 U.S. customers, estimates that pay-TV providers lose about $1,248 per cord-cutter annually. That’s because the average cord-cutter saves $104 a month—about 56% of their bill--from dropping cable TV...“The consumer is discovering they don’t need the mean, evil cable company to get the content that they want, and they can get it for a better deal,” said Steve Beck, managing partner at cg42. A $1 billion loss of revenue is small for the entire pay TV industry, but it is a warning sign.

And it's a warning sign that's going to continue to be ignored by the cable and broadcasting industry. It's abundantly clear that beyond lip service to "innovation," the cable sector doesn't plan to do the one thing that would stop cord cutting dead in its tracks: lower rates. Instead, knowing full well they hold a monopoly over the broadband last mile, they've decided to raise rates on broadband via usage caps and overage fees. Should customers continue to cut the cord, skyrocketing broadband usage surcharges will simply let them grab their expected pound of flesh in a different way.

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