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Marianne Paskowski



Is Cable Really Recession-Proof?

June 25, 2008 11:49 AM

Prevailing wisdom gleaned from past recessions would suggest it is, with a few caveats. During recessions, cable subscribers always trim the sails a little. They drop pricey premium services, only to restore them when the good times roll again.

But this go-round, the economic headwinds are much stronger, with people feeling the double whammy of high gas prices and skyrocketing food costs.

The Associated Press today reports about two kids in Salt Lake City who took to the streets to protest higher gas prices that led their mother to opt out of cable.

And the headwinds are likely to get stronger. The next wave of adjustable rate mortgages will reset, while nearly half of the tax rebate checks have already been issued and spent or saved, likely driving the economy into a deeper hole.

Maybe it’s time for cable to introduce price discounts to keep its customer base. Satellite TV has been aggressive lately, offering unbelievable discounted rates for new subscribers.

Even I, the queen of inertia, am thinking about DirecTV’s offer—it looks tempting.

Anyone out there make the switch yet?


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Comments (7)

paul maxwell:

Coming Monday:
MaxFAX …
For CableFAX – Monday 06/30/08
Recession, What Recession?
Well, it might not be an official recession (yet), but the economic news here in the USA is not so good.
Ask anyone.
Watch the presidential “road to the White House” (to tout our friends at C-SPAN).
Listen at the water cooler (for those of you who have jobs).
Watch the startling growth of the numbers representing how much you’re paying for gasoline as the meager gallons land in your gas tank at your local “service station” (ah, they once really were … I grew up in Texas in the era of 10¢ a gallon gas wars with free giveaways).
Meanwhile, cable has long had a reputation as “recession proof.”
That might not be quite right, but as Comcast’s Steve Burke mentioned during the opening panel of Cable-Tec Expo in Philadelphia last week, it is “recession resistant.” And cable is showing some basic subscriber growth (again; after a long drought) but is feeling that the nation’s economic woes are not going to disappear until, maybe, after next year. Though Steve, like us all, hopes for a nice surprise on the upside. Charter’s Neil Smit echoed Steve while noting that, even in the face of growing foreclosures and underwater mortgages, things were still doing OK.
As Showtime’s Matt Blank noted, despite having a great year riding on a wave of truly original series, he worries a bit, as a premium network, about how hard it is to get to the economic level of even being able to subscribe to a premium net … $60+ often.
And, in his first appearance at a cable show (even though he ran Motorola for awhile), Nortel’s Mike Zafirovsky (Mike Z to friends) suggested we all might better worry a bit about inflation.
All, though, were bullish about cable’s infrastructure advantage (mostly, but not quite all, in place) over the other players in the various business spaces of video, voice and data …
And wireless is on the way via Wi-Max or LTE or something … and Mike Z was just back from a Seattle visit with Clearwire … with some rollout in – Burke hopes – 18 to 24 months.
Stay tuned.

paul Maxwell:

And I've been a DIRECTV subscriber since day one (Nothing like living way out in the mountains).
Got Comcast, too, though.
Had DIRECTWAY.

Jeff Mulligan:

Marianne --

If previous recessions had included skyrocketing nondiscretionary gasoline and food prices, widespread fears of job losses, and housing values in the toilet, I doubt something as discretionary as cable (except basic service used in a CATV way for reception) services would have survived unscathed. In today's conditions, I wouldn't bet that beleaguered households will see pay channel HD on demand as all that essential.

Jeff

Marianne Paskowski:

Jeff,
Here's the rub, people could downgrade to the lowest level of cable service, just to get broadcast and a small smattering of cable channels, given the digital transition in Feb. 09. Of course, do any of us really know if that level of service will exist then. I sure don't.

M

Marianne Paskowski:

Hi Paul,
Well the beard one has weighed in here. Tell your bud Matt Blank to offer price incentives for Showtime.

Meanwhile, anyone thinking of dumping cable, should think ahead to the digital transition in Feb. You will need cable to see something or scramble in chaos to figure it all out.

A lot of people still don't get that, or so I read.

Paul, hope to see you at CTAM on the proper coast:}
Notice I didn't say right.
m

Chi-town Mike:

For those of us who have been fortunate enough to have truly known "you", they know that cable is your bread and butter. (Now it appears that you may be thinking about having your bread and butter served on a dish) :)


Personally I feel that whatever economic state that we live in, I see a gradual overall decline in "traditional cable" not because of the economy, but rather due to technological advances. Satellite TV is more reliable today (during bad weather) than it was 10 years ago. Besides satellite television, internet television on computers is growing both on PCs and cell phones. Finally websites such as Youtube are not your wannabe reality tv outlet anymore. If I missed something on cable to record (intentionally or unintentionally) many times I can find what I am looking for already posted up there.


The bottom line is while increased broadband is a welcomed convenience, it comes at a price. Telephone companies and cable providers are certainly not exempt. Some ISPs/Cable Providers (Comcast being a big player in this) are working on ways to tax people based on their internet broadband usage, basically trying to install an internet tollbooth based upon usage. While it may look good on paper, I feel the backlash against it would outweigh their benefits to be gained.

Then again that topic is a whole other blog... :)

Marianne Paskowski:

Chi,
Yes, I've covered cable for decades,but I'm really platform agnostic. My high speed Internet hookup is DSL from Verizon.

Nor do I subscribe to Comcast's Internet Phone, don't trust it, and I have a great deal, again, with Verizon.

Totally agree with your last graph, Comcast is not alone, Time Warner Cable is also testing charging heavy users more.

Thanks for your post,
M

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