Is This the Tipping Point for Cable TV?

The Tipping Point. It’s the subject of an excellent book by Malcolm Gladwell. He talks about the tiny little changes that cause an idea to go viral, a social change to occur, or a product to succeed. The tipping point is the top of the roller coaster… that moment when all of a sudden nothing is the same.

Tipping points are rarely when you expect to find them. They can come months or years after the start of a change. Think of the actress who “succeeds overnight;” look her up and she’s been working hard for years without your knowledge. Think about when you got a smartphone, when “all of a sudden” you couldn’t look sideways without seeing someone tapping on a touch screen. In fact smartphones have been around since 2002.

If you’re old enough… think about when you broke down and finally got cable tv. Would you believe it’s been around in the US since 1948? At some point you, or your parents, decided that it was enough… you wanted to know what the fuss was about, you wanted more than 4 channels, and you dove into cable television. You might have been early in the process or you might have waited; either way you became one of the roughly 85% of people who use some sort of cable or satellite connection to get their daily television fix.

IPTV started small, with postage-stamp-sized video downloads in the 1990s. Youtube.com exploded on the scene in 2005 and all of a sudden video on your computer was commonplace. It wasn’t until Netflix, Apple, and others started streaming onto your television a few years ago, however, that there was any “TV” in IPTV. Today, television content is everywhere: on your phone, on your computer, on your television. In fact, more and more people rely on internet-delivered content… but broadcast is still king.

Or is it? No matter how you slice it, there’s not a lot of good news for subscriber growth. We reported yesterday on DIRECTV and Time Warner, and Reuters adds to that with their report that Comcast lost 176,000 subscribers in the last quarter. More concerning is that both Time Warner and Comcast are actually happy that their subscriber losses are so small; apparently both have been losing net subscribers for quite some time.

The net subscriber losses are tiny… even adding all of them up it’s 200,000 homes, perhaps 1.5% of people who have cable or satellite. There’s no question where they’re going though: they’re combining antennas and IPTV boxes for the very same content for which they were paying upwards of $100/month.

Why? Despite what many say, it’s not the economy. Americans buy smartphones and designer purses by the trainload; they’ll spend when they see something that offers value or exclusivity. It’s just… cable TV doesn’t have either of those.

Cable TV costs routinely go up 10% per year, yet the amount of new content has slowed to a trickle. Much of this content is available from off-air sources that charge nothing, and supplemented by IPTV sources like Netflix and Hulu Plus for under $20 per month for both. Even with Netflix’s recent 60% jump in prices, truth is it’s a great value compared to cable.

The culprit is high programming costs. As we saw in last month’s conflict with Viacom, content providers continue to ask for double-digit raises in fees for providing fewer and fewer viewers. DIRECTV, who saw the fewest lost customers last quarter, took a strong stance and stared Viacom down. (Even so, industry analysts say Viacom still walked away with a 20% raise. Nice work if you can get it.)

Certainly a big part of “the tipping point” is the buzz generated by the media. A quick search on Google News revealed 459 stories related to “cut the cord.” Clearly everyone is talking about it today, but will they keep talking about it and will it spiral into a full-fledged movement?

Traditional cable companies had better hope not. Cable TV has long enjoyed its status as a “utility” in cities and towns, able to use light poles and underground conduits, while usually offering little more than a “sorry Charlie” attitude toward their customers. For years, traditional cable companies merged to ever bigger sizes while offering nothing more than price increases while satellite and fiber TV blew past them in customer service, channel selection, and features. It’s clear to see that cord-cutting is affecting them most of all and it’s likely they’ll be the first to go.

So is this the tipping point? Probably not. There’s one thing missing from the antenna/IPTV experience and it’s convenience. It’s getting easier to put together a killer cord-cutting solution, but it’s not perfect yet. We may not have reached the top of the roller coaster, but darn if we’re not getting close.