News and Analysis
Three of the top four pay TV operators combined for a total net loss of 476,000 video subscribers in the first quarter.
AT&T, the nation’s largest pay TV company with DIRECTV and U-verse, lost a total of 233,000 video customers. (DIRECTV had a net zero quarter while U-verse lost 233,000); Charter, the third largest pay service, lost 100,000 video subs while Dish, the fourth largest, lost 143,000.
That’s a scary result for an industry that some analysts and journalists say is rapidly eroding due to cord-cutting by cost-conscious consumers.
While the losses still remain relatively small compared to the overall total of subs remaining (nearly 100 million), there’s little doubt that investors on Wall Street will soon strike out at any stock even tangentially tied to the industry.
Comcast is the only one of the top four pay TV operators to manage to avoid the first quarter bloodbath, adding 42,000 net video subscribers. Considering that Comcast lost nearly three million video subscribers from 2008 until 2015, it would be wise for the industry to carefully examine why it has now gained more than 200,000 subs in the last five quarters while others are losing.
Basically, there are four things that Comcast is doing differently than its rivals.
1. Bundling to Keep Customers From Leaving
There’s an old saying that it’s easier to keep an existing customer than attract a new one. Comcast has taken that adage to the bank by offering creative bundles to persuade existing customers from leaving.
For instance, the cable operator peppers Internet-only customers with phone calls, e-mails and other communications to alert them that, in most cases, they could add video service if they just paid a few dollars more per month. That may sound unrealistic, but the price of Comcast’s Internet/video bundle is often just slightly higher than the price of a mid-level Internet plan.
By getting a customer to take two services rather than one, Comcast is more likely to keep that customer on board; the person becomes more emotionally invested in the service.
This technique is especially effective with potential cord-cutters who are searching for reasons for why they should stay with pay TV.
2. Not Cannibalizing Its Own Customer Base
AT&T and Dish have launched live streaming services, DIRECTV Now and Sling TV respectively, which are clearly taking subscribers from their core video businesses and corrupting their marketing messages.
Some advertisements from AT&T and Dish say subscribers should stick with their core video services while others say they should ‘cut the cord’ and subscribe to their live streaming services.
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While the companies include the net gains from streaming in their overall sub totals, this schizophrenic strategy isn’t helping. Some subscribers being told to cut the cord are likely doing so, but not necessarily subscribing to Sling TV or DIRECTV Now; they may instead take PlayStation Vue or simply watch Netflix, Amazon Prime and/or Hulu.
Remember #1. It’s easier to keep a customer than gain a new one.
3. Offering Better Technology
Comcast has rolled out new X1 boxes to more than a majority of its video subscribers and the set-top offers a number of fancy features such as streaming, voice activation and improved guide displays. The aggressive approach to X1 and other new technologies has given Comcast’s video subscribers a reason to stay.
Dish has introduced a few new tech tricks of late, such as the ever inventive Hopper DVR system. But AT&T and Charter have been relatively quiet in the new technology category in the last year or so.
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4. Keeping Focus On Core Business
AT&T has been busy for the last year trying to integrate DIRECTV into the company following its 2015 merger, and launching the new DIRECTV Now live streaming business.
Similarly, Charter has had its hands full since its merger with Time Warner Cable in 2016.
Dish hasn’t merged with anyone, but it’s spending considerable time and money on Sling TV.
But Comcast? Well, the cable operator has focused on the core business since the FCC rejected its merger attempt with Time Warner Cable. This has enabled Comcast to formulate and successfully execute strategies to keep existing video subscribers and attract new ones.
Bottom Line: Comcast’s rivals may have solid reasons for focusing on projects that may divert them from keeping their video sub base happy. But it’s clearly having a cost, one that could show up in their stock portfolios in the coming days.
— Phillip Swann