Comcast's Bread Loses Its Butter

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If you are a cable company or a broadcaster like Comcast (Nasdaq: CMCSA  ) , Mediacom Communications (Nasdaq: MCCC  ) , or Charter Communications (Nasdaq: CHTR  ) , your subscribers are the only thing keeping you in business. Until satellite television providers like DIRECTV (NYSE: DTV  ) and Dish Network (Nasdaq: DISH  ) came on the scene, cable had a near-monopoly for content delivery, which kept customers plentiful.

But since the satellite armies have stormed the walls, competition is very real, and cable needs a way to distinguish its service, lest it lose those precious subscribers.

That's exactly what appears to be happening at Comcast. Roughly 275,000 video subscribers severed their cable relationship this past quarter, and 622,000 year-to-date. The company blames these losses on the weak economy, transition to broadcast digital, customers bailing after discount promotions ended, and "continued competitive pressures."

I'm willing to buy that a few folks dumped cable in exchange for just getting the networks on their rabbit-ear antennae. I'll even believe that once discounts ended, customers moved on.  But I'm placing my biggest bet that Comcast simply isn't keeping up with the marketing juggernaut that is DIRECTV.

We'll know more about whether my theory holds up when DIRECTV and DISH report their earnings. I expect DIRECTV's subscribers to increase again, and DISH to be flat to down.

Almost every American is used to watching infinite channels from cable service. In tough times, the cheapest entertainment they'll get is in-home. A company doesn't lose 622,000 subscribers this way, or from the transition to digital broadcast (puh-lease!), or because discount promotions run their course. A cable company loses subscribers because DIRECTV is on fire. It has good commercials, good service, great packages, and NFL Sunday Ticket.

Also, consumers have long memories. Do you know anyone who says they LOVE their cable provider? They remember the days of no choice. Now they have a choice, and I think I know where they're going.

Fool contributor Matthew Brown owns shares of DIRECTV and uses its service. 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.

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  • Report this Comment On October 28, 2010, at 4:45 PM, NEFAN1 wrote:

    Comcast also has some of the worst customer service. They have made changes to their program offers with the Infinity service, which by the way is very limited unlike its name, unless you get the expensive package. As a customer, yes we left when the promo expired, because Comcast will not extend an existing customer any kind of offer to stay with them. They instead direct you to their website and let you flounder around instead of telling you that because you have service and HAD an offer they will not give you a new one. BUT if you cancel and order in someone elses name, they can give you a new offer. Thats garbage...they have horrible service reps, bad manners and crappy service. The only thing that worked half way decent was their internet...and that was as long as you didn't wanna get online from 5pm to 6pm...when all the folks got home and got on line...We dumped em and I suspect many others will continue to.

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