The Days of Getting a Cheaper Cable Bill by Threatening to Leave May Be Over

The Days of Getting a Cheaper Cable Bill by Threatening to Leave May Be Over

With internet service growing faster and more profitable, subscribers are becoming expendable, meaning pay-TV companies no longer need to entice customers who are threatening to quit with discounts and special offers. Bloomberg reports:

Over the past few years, pay-TV stocks have suffered wicked swings as investors reacted to growing subscriber losses. But they’ve recovered as the companies shift their focus to lucrative broadband services. Comcast, the largest U.S. cable provider, is up 22% this year and Charter is up 36% to a 21-month high, outpacing the 12% gain for the S&P 500. That’s despite accelerating pay-TV subscriber losses at both companies last quarter. 

“It used to be when customers would call and said, “I’m thinking of cutting the cord,’ they’d throw all sort of promotions to keep them from leaving,” said Craig Moffett, an industry analyst at MoffettNathanson LLC. “Now they’re saying, ‘Goodbye, it’s been fun, enjoy the broadband subscription.’” Cable One Inc., a smaller cable company with about 305,000 residential video customers, even helps cord cutters choose between online alternatives like YouTube TV or Hulu’s live TV service, according to Moffett. [C] able executives are now focused on what they call “profitable” or “high-quality” video subscribers and less interested in cutting deals…

As customers drop pay TV, cable companies will actually see their profit margins widen, Moffett said. That’s because much of their pay-TV revenue goes right to channel owners, like Walt Disney Co. and its ESPN network, in the form of subscriber fees. Fueled by expensive sports rights, those fees are even rising faster than cable TV bills, hurting profits for companies like DirecTV and Comcast. Selling high-speed internet is far more profitable.

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