They also restated that AT&T won't force UVerse TV customers to switch if the merger is approved. I wonder if this will make AT&T keep both names after the merger or still just have one name?
http://www.fool.com/investing/general/2015/01/17/youll-never-guess-americas-favorite-cable-compan-2.aspx
Although it's early in 2015, it's already shaping up to be an interesting year in subscription TV. In response to changing consumer trends -- most notably, cord-cutting -- pay-TV providers are in the midst of a transition. First, Comcast (NASDAQ: CMCSA ) and Time Warner Cable (NYSE: TWC ) are still awaiting merger approval, AT&T (NYSE: T ) is also awaiting for merger approval with DirecTV, and bitter feuds like the recently completed Dish/Fox dispute will probably become more commonplace.
Last year's American Consumer Satisfaction Index brought bad news for pay-TV providers, with every company receiving year-over-year drops in consumer satisfaction. Even worse, of the 33 industries surveyed, subscription TV came in third to last, followed only by ISPs (most pay-TV companies also provide this service as well) and social-media networks.
Drumroll, please ...
The most hated company is a pay-TV provider (more on that later), so any talk of a "favorite" here may be a bit of a misnomer.
The best-rated pay-TV provider is AT&T Uverse... well, congrats, or something. By reporting a 69% satisfaction rating, the service takes the top spot in the subscription TV landscape. By essentially having ratings that fell less than 2013's top two providers -- Verizon's Fios and DirecTV -- it's essentially now classified as the best house in a bad neighborhood.
However, that doesn't mean consumers should be running to switch. First, the service is in limited geographies and only boasts 6 million TV subscribers in the U.S. as of its third-quarter financial report -- roughly 5% of the pay-TV market.
AT&T's Uverse is better than others, but may be "uneconomic." Source: AT&T.
AT&T has also admitted that its Uverse is "uneconomic and not fully competitive with cable providers." And while the company later reaffirmed its commitment to Uverse by stating that it wouldn't make customers switch if the DirecTV merger was approved, uneconomic business lines have a habit of experiencing increased prices, decreased spending, or discontinuation.
In addition, a little context is required: This admission was made to the Securities and Exchange Commission in regard to the DirecTV merger. And while the SEC doesn't approve of the merger, another government agency does: the Federal Communications Commission. And in this case, less market power is actually more advantageous for AT&T's approval chances, considering concentrated market power and monopolies are what the FCC seeks to control by merger regulation.
Non-cable TV continues to perform better than cable
Another noticeable trend is the divergence between cable TV and the rest of the industry when it comes to customer satisfaction. For perspective, the top-rated non-cable providers -- the aforementioned AT&T, DirecTV, Verizon, and DISH Network -- are all above the customer satisfaction average of 65. Major cable providers Cox, Charter Communications, Comcast, and Time Warner Cable are all below that average.
Taking the bottom two spots in this survey are the largest pay-TV provider, Comcast, and Time Warner Cable, respectively. And, as previously mentioned, these two companies in the midst of merger approval. And it isn't just ASCI that has a problem with these two goliaths. Consumerist rated Comcast the winner of its dubious Worst Company in America contest last year -- Time Warner Cable cracked the top eight.
Recently, Comcast appointed an executive as its senior VP of customer experience to address poor customer perception, which makes sense, as the large market of New York state has delayed a merger vote twice amid complaints of poor customer service.
A state ban would be tough to overcome, but not necessarily fatal considering their jurisdiction is limited to interstate commerce. However, the federal government hasn't weighed in on nationwide approval, either, pausing the review period a second time recently after it found improperly withheld documents under a claim of attorney-client privilege.
Could this change quickly?
It's important to note that this could change quickly in the 2015 survey. Between the aforementioned planned mergers, new and exciting streaming-based offerings -- most notably DISH's Sling service -- and provider-programmer disputes like the recently settled Fox/DISH dust-up, these satisfaction scores could be vastly different when ACSI reports these annual figures in May.
But right now, Americans are faced with a market where:
The "favorite" pay-TV provider boasts only a 5% market share and has told the SEC its service is uneconomic
The largest pay-TV provider was rated as the Worst Company in America and will greatly expand its footprint to 30%-plus of the pay-TV market if the merger is approved
The industry is among the lowest of all surveyed.
It's no wonder Americans are forgoing pay-TV altogether and opting for streaming-based services like Netflix, Amazon.com's Prime Instant Video, and Hulu Plus. And that's one trend investors need to consider when evaluating this industry.
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