SBJ/October 3-9, 2011/Media

Execs: Blame economy, not cord cutting, for dip in cable homes

John Ourand
I was alarmed when looking at Nielsen’s most recent report detailing how many subscribers each cable network has. Forty of the 41 biggest cable networks saw a year-over-year drop in the number of homes that get their channels.

For the first time in almost two years, not one cable network eclipsed the 100 million-home threshold.

By comparison, in October 2010, 10 cable channels reached more than 100 million homes; the 39 biggest had seen a year-over-year increase. For example, ESPN was in 100.187 million homes in May of this year. Today, Nielsen puts ESPN in 98.648 million homes. That’s a loss of 1.539 million subscribers in just five months. With distributors paying ESPN $4.69 a subscriber a month, that downturn represents a potential subscriber fee loss of $7.2 million a month for ESPN alone.

Are we finally seeing real evidence of cord cutting?

I’ve long thought that cord cutting — the trend where people give up their cable and satellite subscriptions and rely on over-the-air television, DVDs and Internet video — is a real threat.

A cursory look at the pay-TV industry suggests that cord cutting could be happening, especially considering that the country’s biggest distributors are losing subscribers. Comcast and Time Warner Cable, for example, lost a combined 1.2 million video subscribers in the past year, according to a Reuters report.

But these numbers are not as dire as they initially appear, according to several industry executives.

They insist that there’s no evidence that cord cutting is happening to a significant degree. They say any loss in subscribers is due more to the country’s economy and households’ need to cut costs rather than a real desire for cord cutting.

Dallas Mavericks owner Mark Cuban said he doesn’t consider cord cutting a threat. He pointed to the down economy as the main reason why subscriber numbers are dropping, with consumers looking to cut back on their monthly fee.

“If four years ago someone would ask ‘what would happen to TV providers if the economy went into a great recession and unemployment doubled to 9.2 percent,’ the answer would have probably been ‘people would cut in huge numbers to save the money,’” he stated via email.

ESPN shares a similar view. The network has been working with Nielsen since August 2010 to monitor cord cutting. It has found just a small percentage of subscribers cuts the cord every month. For example, from June to September, just 0.24 percent of the Nielsen sample they were monitoring cut the cord. That’s not even a quarter of 1 percent.

“We call this statistical noise,” said Artie Bulgrin, ESPN’s senior vice president of research and analytics. “It is tiny.”

This is why sports TV is so valuable these days. Distributors love to complain about the high cost of sports networks, which consistently are the most expensive in their packages.

But distributors depend on those sports networks to keep cord cutting from taking hold as a real trend.

In June 2010, I wrote about Richard Taylor, an Englishman living in Boston with his American wife and no children. Taylor had cut the cord and was happy. He was saving about $70 a month by using over-the-air TV, Netflix and Apple TV.

But when I checked back in with him last week, he said he restarted his Comcast subscription. The reason? He wanted to watch ESPN and NFL Network for the next three months.

“It’s just for football,” Taylor said. “Once the NFL season is over, we’ll cancel again.”

The Nielsen sample looking at cord cutters reached a similar conclusion. It showed that none — literally 0.00 percent — of the sample’s heavy or medium sports viewers cut the cord. The heaviest cord cutters are light sports viewers.

If cord cutting isn’t happening yet, why is the cable network universe shrinking?

Nielsen recalibrated the numbers based on information from the 2010 census, Bulgrin said. In fact, the number of overall TV homes in the U.S. dropped around 1 percent to 114.7 million. The total universe household had been at 115.9 million.

“This happened after the 1990 census and the 2000 census, too,” he said.

The stat Bulgrin’s keeping an eye on is the percentage of U.S. households that take cable. That number — 91 percent — has not changed much over the past several years.

John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.

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