The Internet's Squeeze on Premium Cable TV

Premium programming subscriptions may be the canary in the coal mine for gauging the over-the-top video threat.

About 44% of digital cable subscribers now subscribe to “basic-only” TV service — meaning no premium movie channels, sports tiers or other extra programming packages — versus 40% last year, J.D. Power and Associates found on its 2010 residential TV customer-satisfaction survey (see Cable TV Subscribers More Annoyed About Prices: J.D. Power).

Actually, because the number of digital cable subs has increased (Magna Global estimates 49.2 million for June 2010, up from 45.5 million in June 2009) the absolute numbers of premium subscribers may have stayed roughly flat. Among movie channels, HBO appears to be bearing the brunt of recent losses while Showtime and Starz picked up subs in the second quarter, according to SNL Kagan figures (via THR).

Still, overall, a decline in take rates for premium programming cannot be a good sign.

What’s the reason for “cord shaving,” as industry pundit Will Richmond of VideoNuze has termed it? Economic woes have prompted penny-pinching, and J.D. Power found growing unhappiness with the overall price of subscription TV. Note that in Q2 2010, the sector registered a net loss of 216,000 subscribers (see Multichannel Market Shrinks For First Time: SNL Kagan).

At the same time, broadband-delivered video options are abounding.

Netflix, which actually has distribution deals with Starz, Showtime and Epix, provides more than 20,000 titles streamed instantly to your TV for as little as $8.99 monthly. By way of comparison, the HBO multiplex of channels through Cablevision is $14.95 per month (see Will Netflix Threaten HBO, Showtime and Starz?).

The premium movie services argue they’re offering lots of original programming (e.g., HBO’s Boardwalk Empire, Showtime’s Dexter) and have exclusive TV windows on big movies — stuff that isn’t available from any other video service.

But the growing variety of easy and inexpensive entertainment choices stands to keep eroding pay-channel take rates, if not pay-TV itself. What do you think? Add your comments below.

For more on this topic, see ‘Scant’ Evidence Of Over-the-Top Cord-Cutting: Analyst, Verizon CEO Says Cable TV’s at Risk, TWC, Cablevision Franchise Deals With NYC Include ‘Cord-Cutter’ Provision, Apple TV: Nibbling at the Edges, ESPN on Xbox: No Cord-Cutter and this week’s cover story, Over the Top Assault (subscription required).