Although we've seen endless reports about how Netflix and other on-demand Web video services are kicking conventional media in the pocket, cable companies don't seem particularly alarmed. During the annual industry event "The Cable Show," executives from Comcast, Time Warner, News Corp. and other conglomerates claimed that they are more concerned about poverty-stricken Americans.
According to Viacom CEO Philippe Dauman, cable television is one of the last expenses people cut when the going gets tough, but a growing number of customers are being forced to cancel their subscriptions to scrape by. "There clearly is a growing underclass of people who clearly can't afford [cable]," said Time Warner Cable CEO Glenn Britt. "It would serve us well to worry about that group."
Considering how liberally cable providers jack up their rates, it's no surprise that subscribers are jumping ship. "That has been a wonderfully attractive model for a generation, but the danger, of course, is that eventually the video product will be priced into irrelevance for lower income consumers," said analyst Craig Moffett. "I don't know when it will happen, but I suspect we're already perilously close."
There has been plenty of debate about how much Internet-based competition is affecting conventional media channels, and we've yet to see a definitive answer. Nonetheless, there's no denying that cord-cutting is a real phenomenon -- if only a small one -- and Netflix is undoubtedly playing a role. In April, the company tied Comcast for total subscribers and reported an 88% profit increase on-year.
Just this Monday, The Diffusion Group published a study that concluded 32% of Netflix users are thinking about downgrading their pay TV subscription in the next six months -- up from 16% last year. A recent poll by Roku found that some 15 to 20% of its customers planned to cancel their cable or satellite TV services and rely solely on Web video. Have you kicked your cable provider to the curb?
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