Cable's Falling Subs, Like Its Revenue Streams, May Have Two Parts
While almost all media has been beleaguered during the Great Recession, cable has been an exception, because of hefty viewership and a powerful dual revenue stream of subscriptions and advertising. But Time Warner Cable (TWC) is making investors question whether that strong foundation is starting to crumble, saying yesterday that it may see a drop in third quarter subscriptions; though the company didn't give specifics, CFO Robert Marcus said the sub picture was "very, very weak" at an industry conference. The news comes only a few days after HBO, owned by Time Warner, said it had seen a slight decline in subscribers in the first half of the year, despite the success of series like True Blood -- which, like everything, you can also just buy on iTunes.
The, well, haunting, news caused shares in TWC to slip by the end of yesterday by more than five percent, from $2.74 to $52.43. (At this writing, it's down by roughly 2.5 percent today.) It has, for obvious reasons, also sent the stocks down of competitors.
Of course, the main factor that people, including TWC execs, are pointing to is the still weak economy, but is that all there is to this? You have to wonder. It seems, as with cable's revenue, the dip in subscribers could be two-pronged. Yes, cable is expensive, and when times are tight, a relatively easy thing to cut out of the budget. But snipping it out of the household budget is also less of a sacrifice than it was in past recessions -- now that Hulu, iTunes, NetFlix, YouTube and a raft of other services make it easier to watch plenty of quality cable programming without having a cable sub.
Unless you take viewers' expanded options into account, it seems a little late in the recessionary game for people to start pulling out their coaxial link to entertainment. With at least some signs that the economy is improving -- and the employment picture not pretty, but relatively stable compared to last year -- it seems as though subscriber declines would have happened a few quarters ago, not now. Instead, maybe some consumers are putting two and two together and figuring out that, with minimal sacrifice, they can save upwards of $100 a month. It's a recession/more options double whammy.
The good news for the cable industry -- if there is any here -- is that relative to broadcast TV, and print before it, it's been more protective of its content. Initiatives such as TV Everywhere, spearheaded by Time Warner CEO Jeff Bewkes, let people do online streaming of some programming only if they already have a cable sub. (Other major cable operators, including Comcast, are also in the program.) But most consumers are probably unaware of the plan -- the service is currently only in test, but expected to be in 50 million homes by some time next year. In fact, when that happens, it will probably be the best indicator of whether this current subscription slide is only about the recession, or about a fundamental shift in media consumption behavior. If subscribers find out that the free lunch for lots of TV programming is over, cable subs may come roaring back.
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