Some Small Cable Companies Are Dropping TV, And Customers Don’t Seem To Mind

(Molly)

Plenty of people have cut back on pay TV — cable and satellite — and gone to internet-only subscriptions in order to save some cash. But the individual cord-cutters aren’t the only ones realizing how expensive programming can be, and how they can live without it in the broadband era. Some small-scale cable companies are also taking the plunge, and cutting out TV service altogether.

The Wall Street Journal reports on a segment of tiny cable companies — some serving as few as a hundred customers — that have made the jump to becoming ISPs only, providing just broadband and phone service to their customers.

The cord-cutter who subscribes to just broadband service, and not pay TV, is a real and growing segment of the population. Although roughly 100 million people still pay up every month for access to prestige dramas and endless Law and Order reruns, over the coming years and decades the trend line is clear: the long-term future is about broadband distribution of content.

Meanwhile, all of that programming really is quite expensive. The details of carriage contracts are highly confidential, but in general a cable company pays networks a few cents to a few dollars for each subscriber that can receive them. So for example, a cable company that includes USA in its basic tier must pay Comcast (owner of NBCUniversal, and therefore of USA) about $0.83 for every subscriber of theirs that gets the basic tier.

For a company that only serves a few hundred or a few thousand consumers, the cost just isn’t worth it. So, the WSJ explains, some tiny providers like Ringgold Telephone in Georgia and BTC Broadband in Oklahoma have eliminated TV service altogether.

Others are strategically cutting back on which channels they decide to offer. Suddenlink, which serves about a million customers, this week stopped including Viacom networks in its lineup.

This is not the first public carriage dispute in recent years to black out Viacom, which owns Nickelodeon, MTV, and Comedy Central among other networks. But consumers increasingly don’t seem to mind going without: earlier this year, a group of small providers serving 900,000 households stopped carrying Viacom channels. They expected to lose as many as 10% of their subscribers but have seen drops of less than 2%, according to the WSJ.

Since 2008, the WSJ reports, about 53,000 cable subscribers have seen their providers either dump TV or go out of business, with the trend accelerating.

Major media companies obviously make much less money from cable operators with a few hundred subscribers than they do from cable operators with several million, like Comcast. But the WSJ estimates that even a 5% drop in subscribers over the next few years could mean up to $2.4 billion in lost revenue for “basic cable networks alone,” which media companies are unlikely to let go without a fight.

Still, although both cable providers and content companies are trying to figure out how to navigate the next few messy years, neither group is worried about the end of TV, so to speak. Both eventually expect that internet-based pay TV services, like the nascent offerings from Sony and Dish, will eventually fill the gap. Provided, of course, that the future of broadband mega-mergers and net neutrality give new options room to grow.

More Cable Companies Take TV Off Menu [Wall Street Journal]