Why Do Customers Leave Comcast, Time Warner, and the Other Big Cable Companies?

By Markets Fool.com

It's not happening fast, but it is happening.

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Pay television subscribers are leaving the big cable companies --Comcast,Time Warner Cable,Charter, andCablevision . In addition to the top four providers, the next nine largest pay-TV companies (which covers about 95% of the market) saw subscriber drops in the second quarter of 2014, according to Leichtman Research Group.

These companies lost about 300,000 net video subscribers in Q2 2014, compared to a loss of about 350,000 video subscribers in Q2 2013, the research company reported.Even the two satellite pay-TV providers lost customer for the period, with DirecTV losing 34,000 customers while Dishdropped 44,000 subscribers.

It's a slow trickle, but it's a downward trend unlikely to reverse itself.

Pay-TV Providers Subscribers at
End of 2Q 2014
Net Adds in
2Q 2014
Cable Companies
Comcast 22,457,000 (114,000)
Time Warner 11,212,000 (147,000)
Charter 4,320,000 (35,000)
Cablevision 2,771,000 (28,000)
Suddenlink 1,168,800 (18,700)
Mediacom 919,000 (18,000)
Cable ONE 490,309 (34,254)
Other Major Private Cable Companies* 6,570,000 (85,000)
Total Top Cable 49,908,109 (509,954)
Satellite TV Companies (DBS)
DirecTV 20,231,000 (34,000)
DISH 14,053,000 (44,000)
Total DBS 34,284,000 (78,000)

Source: Leichtman Research Group.

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Changing technology and increased choices may make it impossible for the cable companies to stop losing customers altogether, but they might be able to stop a massive drop in paying customers. To do that, the pay-TV providers will need to understand why people are leaving.

Cable companies are not well liked
Pay television services consistently rank near the bottom of all companies on the American Customer Satisfaction Index. In the 2014 ACSI report, customer satisfaction with subscription television service fell 4.4% to an ACSI score of 65 after peaking at 68 a year ago.

"The sharp decline positions subscription TV among the least satisfying industries measured in the American Customer Satisfaction Index," the survey said. "Only Internet service, which is provided by many of the same companies, scores lower at 63."

Cable does not rank well even when compared with other household services including energy utilities (76) and fixed-line telephone service (73). To make matters worse, the largest cable companies Comcast (63) and Time Warner Cable (6) score at the bottom of the list for the already not-liked category.

People like cable companies less than they historically have at a time when technology has given them entertainment alternatives including streaming services likeNetflix and Hulu.

The cost is too high
My fellow Fool Jamal Carnette wrote a piece earlier this month on the exploding prices Americans pay for cable. In it, he cited data from NPD Group showing that in 2015, the average subscriber will pay $123 per month for pay TV. That's up from $86 a month in 2011.

Cable prices have inched up steadily over the years, which is easy for an industry without competitors to do. Now that streaming options exist, an increasing number of customers are deciding that paying around $10 for even a few different streaming offerings makes a lot more sense than paying for cable.

There are choices now
When cable first launched on a widespread basis, the Internet was not yet a thing, and pay TV, which was generally offered by a single provider in each community was the only way to access programming beyond the traditional over-the-air stations. That's certainly no longer true. Anyone with high-speed Internet, a computer, or a streaming device like Google'sChromecast or Amazon'sFire TV Stick (both of which cost under $40) can access an enormous amount of low-cost or even free content.

Brian Dietz, aspokesman for the National Cable and Telecommunications Association, told The Washington Postthat the rise of streaming services like Netflix and satellite television providers has eaten away at cable's marketshare.

"The top four biggest video subscription services in the U.S. are an online video provider [Netflix], a cable company and two satellite companies," said Dietz.

Netflix, which claimed 37.7 million U.S. subscribers in its latest earnings report, has even more paying customers than the combined 33 million or so who would be served by a combined Time Warner and Comcast. The difference, of course, is that Netlifx customers pay $7.99 to $8.99 a month (depending upon when they joined) and cable customers pay much, much more.

Cable won't be able to stem this tide
If cable does not make massive changes to how it operates as an industry, the number of people leaving is likely to increase as options for consumers increase and improve. Fifty-three percent of respondents to a recent survey by consulting firm cg42 said they'd leave their current cable company if they had a choice, The Washington Postreported.

"You have a soup of misery," cg42 managing partner Steve Beck told the paper. Of all the industries the company has studied, he added, "these are the highest levels of [company] vulnerability and [consumer] frustration we've ever seen."

Cable is not well-liked, expensive, and slowly being replaced by cheaper ways to watch TV and consume video content. Those are difficult, but not impossible things for the industry -- or even individual companies -- to change.

The article Why Do Customers Leave Comcast, Time Warner, and the Other Big Cable Companies? originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. His first cable box was wired and had a push button for each channel. The Motley Fool recommends Amazon.com, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.