Are Cord Cutters Going Back to Cable TV?

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young couple preparing to watch ...
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TV fans are coming back to Comcast (CMCSA). The country's largest cable provider closed out the first three months of the year with 22.6 million video customers, 24,000 more subscribers than it had when the quarter began. This follows a sequential gain of 43,000 cable TV subscribers during the holiday quarter.

After suffering through 26 consecutive quarters of sequential declines in video customers, Comcast is finally signing up more cable TV subscribers than it's seeing cancel. Are the increases sustainable?

We Haven't Seen the Last of the Cord Cutters

Something particularly problematic happened last year. The number of pay TV customers in this country fell by 251,000 in 2013, according to industry tracker SNL Kagan. This may not seem like an alarming number given the more than 110 million people pay for cable, satellite or broadband television, but this is the first full year of an aggregate decline.

Comcast played a big part in the industry's first down year. It suffered net defections of 305,000 last year, more than the 251,000 total net cancellations. Put another way, take Comcast out of the equation, and the pay TV industry actually grew last year.

That's not entirely fair. Comcast wasn't even the biggest loser, as that honor goes to Time Warner Cable (TWC) which closed out 2013 with 825,000 fewer video accounts than it had when the year began.

In recent years we've seen cable TV customers flock to cheaper satellite and broadband alternatives. Satellite TV may seem like a drag with the dish installations and weather-related outages, but consumers can't seem to resist the lower monthly bills at DISH Network (DISH) or the football-centric NFL Sunday Ticket exclusive to DirecTV (DTV).

The success of DISH and DirecTV -- as well as aggressively priced broadband-based options, including FiOS by Verizon (VZ) and U-verse by AT&T (T) -- has come at the expense of Comcast and its smaller cable TV providers. After all, pay TV subscribers grew for all of 2012, but Comcast surrendered 336,000 of its video customers.

It's Not Just a Housing Play

Some analysts have argued that pay TV providers -- including Comcast -- are stealth housing plays. The real estate market is showing signs of life, and more occupied homes translate into more families watching TV. Despite the industry's first decline in 2013, we saw the number of housing units increase by 323,000 as an improving economy and buoyant real estate market encouraged more people to move into new homes.

However, the meandering pay TV market is no match for the growing popularity of streaming services favored by millennials. Why pay $76 a month -- that's the average that Comcast generated in video revenue a month from its subscribers during the first quarter -- when Netflix (NFLX) costs just $7.99 a month? Consunmers have smartphone data plans to pay. They can buy individual episodes of shows that they just can't wait to watch. They can wait to see somebody eventually roll out a cost-effective service that doesn't bundle a bunch of channels that they aren't watching.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends DirecTV and Netflix. The Motley Fool owns shares of Netflix.


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14 Comments

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YourFtr

What did the government actually do with all of the old free TV channels !??
Or are they to be used for the underground bunkers of the 5% if everything goes bad........

April 25 2014 at 1:04 PM Report abuse +1 rate up rate down Reply
taostop

I just switched to Comcast from DirecTV. My main reason was the internet which I had with AT&T (very slow). I liked DirecTV but it was too EXPENSIVE! My switch saved me $50 per month.

April 25 2014 at 12:12 PM Report abuse rate up rate down Reply
quebholder

who are they kidding, satellite is definitely expensive.

April 25 2014 at 11:55 AM Report abuse rate up rate down Reply
eugene.hensley

Those big, old, bulky, outdoor antennas will still pick up your local stations, and deliver digital, high definition pictures. No converter box is needed, if a newer digital T V is used.

April 25 2014 at 10:00 AM Report abuse rate up rate down Reply
mac2jr

Have Basic Comcast in Tucson, it is 110 channels of Spanish Language programming, QVC and other sales, repeats, repeats, repeats, repeats, and a few actually decent channels of news, CSpan, and stuff worth watching. The problem is that to get a full-service company that has Internet, Long-distance phone, and television in south Tucson, one is limited to Comcast, as Cox, and Direct, and Hughes, and Centry, and whatever all have limits on their service.

I tried a Dollar Store Digital Table Top Antenna, (Family Dollar $12.95) and it worked well and provided 23 very clear channels, but 13 were Spanish and I do not speak Spanish yet.

What most of the younger viewers do not remember is that we were told that by 'buying cable' we would be Advertising Free, not like the over the air networks that had 30 to 60 seconds of ads every 15 minutes. There were laws passed to limit ads to one minute, and the networks found a way around by going back to the program for 5 seconds and then playing another 60 seconds of ad, thus the Cable Television 'Promise' of NO Commercials if we PAID for CABLE... BS. we now have 18 minutes of Commercials on Network television per hour, and nearly the same on the Cable networks.

Where the .... are our Government Regulators that were to see that the consumer was not being ABUSED by the Corporations? Paid off it appears...

The truth be know, the Corporations now OWN the U.S.A. and its government on all levels, and we shall never again have FREE TV...

April 24 2014 at 4:40 PM Report abuse +1 rate up rate down Reply
Seth

"Consunmers have smartphone data plans to pay."

I guess I am not one of those "Consunmers", whatever that is?

April 24 2014 at 2:44 PM Report abuse +1 rate up rate down Reply
simon645

In Nevada, Cox rules the roost. You can get Dish or Direct TV or Satellite but none of those do it for me. I have my cable, phone and TV from Cox. Generally it works well but it costs me a lot.
I depend on some cable channels and would miss them dearly if I didn't have them. I also have the premium channels. And the MLB costs me $200 for the season but I gotta have it. A matter of preference and priorities I guess. The phoney baloney antenna options are crap.

April 24 2014 at 12:35 PM Report abuse -1 rate up rate down Reply
Michael

Cable is one bigf inefficient rip off. I have tried it many times and always go back to sattelite.

April 24 2014 at 12:22 PM Report abuse +1 rate up rate down Reply
alfredschrader

You can get news and digital weather over the air now (free).
My DISH experience was horrible. They told me $19.99 but my bill was $53.55 a month.
If a cloud blew over it went dead. Their teh line is a robot and the equipment goes obsolete in 3 years but they never tell you.
But even worse it takes about an hour to click through all 400 channels and only one is any good.
The rest of it like the Japan Channel, the sewing channel, the hanging plants channel, etcetera are a waste of time.

You can get 90% of it and much more reliable by going with Netflix and using a good pole mounted digital antenna. I'll even give you the design for free if you ask me.

April 24 2014 at 12:03 PM Report abuse +1 rate up rate down Reply
3 replies to alfredschrader's comment
Silent Hill

Brighthouse was the worst. Service and quality was abysmal. I wound up having no choice but to cancel. Dish is way better a provider. Still, the programing stinks even with 200-400 channels. Plus Holywood stopped making movies about a decade ago. (I know it's not the provider's fault)

If money ever got tight this would be the first thing I would cut out of the budget. I doubt I'd even miss much beyond the news and weather channels.

April 24 2014 at 11:03 AM Report abuse +4 rate up rate down Reply