With services like DirecTV Now, Dish’s Sling TV, and PlayStation Vue proliferating everywhere, it seems as if finally the age of the cord-cutter is going mainstream. A subscriber who cuts out their pay-TV service could see their bill drop by $50 or $100 in a month — but does that mean your cable company is losing that much revenue from you? One major industry analyst thinks it’s not even close.
Previous studies have found that on average, the trend of cord-cutting overall could be costing providers about $1 billion a year in total lost revenue.
But any random Comcast subscriber is obviously not canceling $1 billion worth of services per month. More likely, their bill is somewhere in the $50 to $200 range. So if you, personally, drop your pay TV but keep your only option for internet access so you can stream stuff… how much, if anything, is Comcast losing from you?
That’s what telecom analyst Craig Moffett decided to figure out. And in the end, his estimate comes to: A little more than five bucks per month.
Here’s how FierceCable says he did the math.
For starters, Moffett assumes that anyone getting both internet and TV service is paying a bundle price. Those, he says, have some built-in cushioning in the event that the customer cancels part of the bundle. Why? Because with internet-only service being more expensive than many bundles, Comcast manages to encourage customers not to cancel their TV service, and also to have a built-in revenue bump in the event you do.
When a Comcast customer cuts their video cord, Moffett estimates, Comcast loses about $38. But the cost of that customer’s broadband, if they want to keep the same connection speed, goes up about $25.
That brings the total monthly loss from $38 down to $13 already. Then, Moffett estimates, there is the reality of the cord-cutter: many are going to want faster broadband access to be able to stream all the TV they aren’t getting through traditional means anymore. He hired a survey firm to find out how many, and came up with about half.
That speed upgrade, Moffett estimates, is probably going to run about $15 a month, “implying a probability-weighted $7.50 benefit per cord-cutter.”
The final answer he comes up with after all that? Comcast loses about $5.50 a month in revenue if you cut the cord.
Clearly there are a lot of assumptions going into Moffett’s work, and individual subscribers’ cases may vary. There are the half of consumers who wouldn’t increase their broadband service tier, for example, and real-life customers may easily negotiate down the real price they pay.
Still, his core finding seems to ring true: for all that you’re canceling a service, in the long run sticking around for only the internet access means you’re still generating a profit for the provider.
Source: Consumer Reviews