Ah, competition. It’s a beautiful thing. But it works in mysterious ways.
Cable TV has had an excellent run. The average cable bill pierced through $100 a month in 2015, according to Leichtman Research Group. And I know that sounds low to many of you. Calculated another way — average revenue per user — cable firms soaked consumers for an average of $161 a month in 2015. From 2011 to 2015, cable bills soared 39 percent! Sounds like an industry that is killing it (and killing consumers), no?
But all is not well in Pay TV Land. During that same stretch, the very term “cable” has started to become obsolete. Increasingly, Americans are cutting the cord. Many find they can watch everything they want on Netflix or Amazon. Homes with an aerial installation can still watch the basic channels too without having to pay for a cable subscription, making the cable subscription redundant. Others are subscribing to revolutionary “over-the-top” services like Sling TV, which delivers ESPN to your living room over an Internet connection for as little as $25 a month. And, really, it’s $25. And there’s no set-top-box fee. And there’s no $480 early cancellation fee.
The change has been dramatic, and it’s forced wired carriers like Comcast and FiOS to respond with so-called “skinny” packages that cost around $50 a month. Advantage consumer.
The trend isn’t moving as fast as you’d think, however. While plenty of people have added streaming services to their media diet, many still pay for cable or satellite TV. A Deloitte survey in 2017 found that 49 percent of Americans pay for a streaming subscription like Netflix, compared with just 10 percent in 2009. But a steady 74 percent still pay for traditional pay TV. One theory about why: Many consumers get their Internet and TV service from the same provider, so bundling has slowed cord-cutting.
There are still 196 million U.S. adults who pay an average of $100 a month or so for pay TV. Even if that number drops 2 percent or so each year, as it has been, that’s a lot of revenue for the near future. Advantage industry.
Behind the data lies a very ominous sign for the pay TV industry, however — the “cord-nevers.” Plenty of young people today have never paid for cable and have no intention of doing so. Fully 35 million adults, or about 6 percent of the population, have never subscribed to a pay TV service, according to eMarketer. That’s a business with a perilous future.
What does this mean for you? Well, a wounded animal is a dangerous animal. Cable and satellite firms aren’t going down without a fight. Their most lucrative customers are the laziest ones. They love consumers who just keep auto-paying their bills as rates soar, old fees rise, and new fees are invented. (Have you spotted that $5.89 regional sports network fee? Shouldn’t your subscription to the sports package pay for that? Guess not.) To keep the gravy train running, pay TV firms are going to have to milk their lazy subscribers for all they’re worth.
Don’t be one of them. Now, more than ever, “bid” out your pay TV service frequently. Call to threaten that you’ll be a cord-cutter and get that bill under $100. You’ll probably receive a discount with a time limit; make sure you make a note in an electronic calendar well in advance of expiration so you can call and demand a discount again.
Most important, take stock of your real TV habits. Could you make do with Sling TV and Netflix? Do you need more exercise anyway? You might be surprised at what you can watch with an old-fashioned antenna — I know you’ll be surprised at how great the free picture is.
I’m here to tell you, that’s way better than a surprise pay TV bill. So far, the over-the-top providers have avoided all the well-worn Gotcha tactics, like DirecTV’s $480 early termination fee. They are trying to cast themselves as hip, fun, fair enterprises to fit the millennial ethos. As the industry shakes out, perhaps that will change. It almost has to. Someone has to pay for those multibillion-dollar NFL rights contracts. Or, perhaps not. ESPN, long the titan of pay TV, is itself in real trouble because of those large contracts. Things will most certainly change. Will that mean you pay more, or ESPN pays less, for football? I’m kind of excited to find out. I’m very excited that my TV bill is $25.