An article by Ben Munson in Fiercevideo quotes Chris Winfrey, the CFO of Charter, as saying that the breaking point for traditional cable TV is approaching. While Charter is still making money on selling video, all of the industry trends make it hard to think that traditional TV has a lot of legs.
Traditional video has a lot of competition. The most obvious are paid online video services like Netflix, YouTube TV, Hulu, sling TV, and others. But Winfrey cites a big threat from free programming. There are numerous free ad-supported programming sources like IMDb TV, Crackle, Vudu, Tubi TV, and Pluto TV that offer mountains of programming. Winfrey also cites the millions of people who watch for free by using the passwords of a paid subscriber to online content.
Another huge factor is the ever-increasing cost of buying programming. Winfrey says that Charter has absorbed some of the programming costs in recent years but says that in the future, he sees no alternative to passing the programming increases to customers. Price is already a huge factor in driving customers from traditional cable TV, and continued price increases are bound to drive many more millions from the paid subscriptions.
A final issue cited in the article is the high price of carrying local network stations. The fees to carry ABC, CBS, FOX, and NBC have climbed steadily and are a huge factor in the cost of cable packages.
Winfrey thinks the only hope for companies like Charter to keep offering a cable product is to allow cable companies to package programming in different and creative ways – something the programmers don’t see interested in considering – because it likely means trimming channels.
This is an industry segment in crisis. The largest dozen traditional cable providers, including the satellite TV companies, lost almost 6 million customers in 2020 – and the rate of loss looks to be accelerating.
Many smaller ISPs have either dropped cable entirely or are strongly considering it. Other smaller ISPs are now buying alternatives like smaller packages of programming from bundlers of content. Windstream started bundling last year with online providers like Sling TV.
My firm does surveys, and we’ve seen a huge uptick in the last two years of homes that have gone back to rabbit ears to receive local content for free. As recently as three or four years ago, we’d sometimes do a survey and find practically nobody watching over-the-air.
This trend is not a surprise and we’ve been watching the wheels fall off the traditional cable industry for years. But as rates keep climbing, and as more free alternatives appear, it seems likely that cord cutting will continue to the point where some big cable companies will throw up their hands and consider alternatives.
It’s hard to picture any big ISPs with millions of traditional cable customers a decade from now. At some point, I guess we’re going to have to stop using the label of cable company for Comcast, Charter, and others.