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Two years ago, cable executives and industry analysts pooh-poohed the cord-cutting phenomenon. Time changes everything…

Yesterday, Comcast Corporation announced its 3rd quarter financial results, and they reveal a disturbing trend: 275,000 basic cable subscribers said goodbye to Big C, helping to put a pinch on the company’s net income, which dropped 8.2% to $867M on sales of $9.4B.

According to a story on the Fierce Cable Web site, remaining Comcast subscribers paid an average of $129.75 per month for various services.

The story suggests four factors that are driving people to drop cable TV subscriptions – the economy, the flagging housing market, constant rate increases, and the digital TV transition.  Comcast Cable Communications President Neil Smit was quoted in the story as saying there are no signs that the customers are giving up cable for over-the-top (Internet TV) services. “All our active surveys have seen almost no impact from OTT… (a) small number of customers appear to be going over-the-air (DTTB) more than any over-the-top impact.”

The term “cord-cutting” first appeared in early 2008 as the current recession took hold, forcing many households to re-assess the amount of money they spent each month on communications and entertainment services.  Currently, it’s not unusual for a typical ‘triple play’ service (VoIP, broadband and cable TV) to cost $130 a month or more.

Add in monthly charges for a standard family wireless phone plan, and we’re starting to talk some real money here!  So it’s no wonder that consumers are looking for more economical ways to watch TV – and free, over-the-air digital TV (with lots of HD) is definitely one of them.

DTTB also solves the current Fox – Cablevision dispute quite nicely for several million subscribers in the New York City metropolitan area – that is, if they can figure out how to connect an antenna to their digital TV. In many cases, that means nothing more than a $12 Radio Shack UHF loop and rabbit ears.

Comcast COO Steve Burke called attention to the problem of cord-cutting a year ago at the CTAM convention in Denver, CO, referencing the burgeoning OTT video services and pointing out that “…An entire generation is growing up, if we don’t figure out how to change that behavior so it respects copyright and subscription revenue on the part of distributors, we’re going to wake up and see cord cutting.”

How prescient. As I’ve written in the past, families are starting to value their broadband service more than tiers of dozens of cable channels, most of which are never viewed anyway. The logical move is to put up an antenna, add in video streaming from Netflix (something Redbox is also about to offer) for a flat monthly rate, and supplement both with selected network TV offerings on Hulu.

The cable TV industry has a legitimate concern here, but it’s their own fault for falling asleep at the switch.  No one should ever assume they can’t price themselves out of a market. It’s happened before, and it will happen again. The challenge for Comcast and other cable MSOs is how to re-structure their standard TV channel offerings into a more affordable a la carte model, served up on demand.

That’s obviously what consumers want, and they’re voting with their wallets. Is Big Cable listening?

Posted by Pete Putman, October 27, 2010 3:05 PM

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About Pete Putman

Peter Putman is the president of ROAM Consulting L.L.C. His company provides training, marketing communications, and product testing/development services to manufacturers, dealers, and end-users of displays, display interfaces, and related products.

Pete edits and publishes HDTVexpert.com, a Web blog focused on digital TV, HDTV, and display technologies. He is also a columnist for Pro AV magazine, the leading trade publication for commercial AV systems integrators.