A recent article in Axios was titled ‘Cable TV’s Slow, Painful Death’. The article makes a few interesting predictions about the cable industry. The article predicts that 25 million homes will cut the cord by 2025. Since the traditional cable industry has recently been losing over a million homes per quarter it’s not hard to imagine losing five million cable homes per year. The article’s boldest prediction is that the industry will stabilize at 50 million homes – something I’ve not seen predicted elsewhere.
The article’s prediction matches the belief of many, that cable is quickly dying. But there are a lot of moving parts in the industry trends that could lead to different long-term outcomes. Consider the following:
- In the recently completed third quarter of this year, the MVDPs alternatives of Hulu + Live TV, Sling TV, and AT&T TV Now added as many customers as were lost by traditional cable companies. By the time you add in fuboTV and YouTube TV, this industry segment added more customers than were lost by the traditional cable companies for the quarter. This indicates that a lot of homes are still willing to pay to watch the traditional networks that have been carried by the traditional cable providers. Is it possible that loyalty to traditional cable programming will be strong enough to keep most homes buying some version of cable programming?
- Several online MVPDs have announced significant price increases in just the last month. Saving money is the major reason that households say they are cutting the cord. How many homes will hesitate to cut the cord or even return to cable companies if the price of the online alternatives is also perceived as expensive?
- The cable companies are already resigned to losing traditional cable customers, and most of them have publicly said so. While losing cable customers cost these companies a lot of top line revenue, the margins are so thin on cable that bottom line losses are relatively small. The margins on cable TV have been shrinking to the point that there is no margin for smaller companies providing cable TV, and the margins for the large cable companies can’t be a lot better. This trend would indicate that cable companies might not even try to keep cable customers.
- As Axios points out, sports programming is the big unknown. It’s what keeps a lot of homes buying traditional cable. A lot of pundits are predicting that sports networks will strike out on their own, but that’s incredibly risky and might not happen. Consider the example of the Big Ten Network. The best I can tell the network is collecting monthly fees from around 60 million homes per month. If those fees are fifty cents per month (I’m just guessing), then the network would have to find two million customers willing to pay $15 per month for the network to break even. These networks have to be seeing the same trends mentioned above where the Big Ten Network is picking up customers online at the same pace it’s losing traditional cable customers. I can’t see any current motivation for the Big Ten Network to strike out on its own.
The bottom line from these trends is that nobody can foresee where the industry is going. It’s clear right now that homes are cutting the cord from the traditional cable companies. The big wild card in making any predictions is what the biggest traditional cable companies decide to do. If these companies decide to stop fighting for cable customers, then the traditional industry could collapse a lot faster than predicted by Axios.
But the big companies could also decide to remain relevant in the industry. The big cable companies could migrate programming online or could buy the biggest online providers. Perhaps the big cable companies can finally convince Congress to allow for some version of a la carte programming to let people buy only the channels they want. There is also nothing stopping traditional cable companies fro streaming content so that viewers could binge watch a whole season.
There is one interesting wild card that must be influencing the big cable companies. The big four of Comcast, Charter, AT&T, and Verizon control 73% of the cable market today – but they also control 73% of the broadband market. None of these ISPs want to see the programming from the remaining 76 million cable customers flood online. That much of an increase in video would swamp the broadband networks of these providers.
I love making predictions because as a blogger I’m not hurt if my predictions are wrong. But my crystal ball is totally cloudy when it comes to predicting the trajectory of how people will choose to watch video.