I expect that customer losses will accelerate over 2019 levels. The majority of subscribers leaving traditional cable cite cost as the primary reason, and as millions of people lose their jobs, one of the first things they are going to do is to ditch traditional cable for something less expensive. For years, nationwide surveys of subscriber sentiment have shown that as many as 20% of households each year contemplate dropping traditional cable TV, but for a variety of reasons many households don’t get around to doing so. This year a lot of these homes are finally going to make the change.
The industry has also lost its largest advertising draw in sports. MoffettNathanson predicted that just losing the spring and early summer sports could cost the industry as much as $26 billion in advertising. If COVID-19 carries forward through baseball and into football season those numbers will climb much higher. The MoffettNathanson numbers also didn’t include the impact on Comcast of delaying the Olympics for a year, which are a significant piece of corporate earnings. The impact of sports advertising will be uneven throughout the industry because of contractual relationships. Many contracts require networks to continue to pay for sports rights to the various sports leagues even if the games aren’t played, but contracts also require the leagues to compensate networks for lost advertising revenue. That’s going to mean a lot of lawsuits, but the bottom line is that sports leagues and cable networks will both lose a lot of revenue.
Advertising is taking additional hits. Travel-based advertising has already disappeared. It’s also now obvious that a lot of local advertising is drying up as small businesses feel the pinch from this crisis, affecting both local TV stations and newspapers. A number of small newspapers around the country have already folded, and local television and radio stations are likely to follow.
Another big hit for the industry will come as the production of new content has slowed to a crawl. Movie and television studios have put the production of new content on hold. How long will homes remain happy crawling through the old content on Netflix, Amazon Prime, Hulu, etc?
Sports networks are in big trouble since they have no live content to share. Watching ESPN right now is downright sad for a sports fan. Sports fans might watch old playoff games on ESPN, FS1 and other networks for a few weeks, but that’s going to get quickly lose its appeal.
The programmers have already baked future rate increases into their future contracts with cable providers. With sports programming and new content both dwindling, I expect a lot of small telcos and cable companies will decide that this is a good time to ditch the cable product entirely. Half of my clients that offer cable TV have already been having internal discussions about if and when to walk away from cable – this year might provide the impetus to do so.
If there is any silver lining for the industry, it’s that this is an election year and there promises to be a lot of political advertising between now and November – at least in states with close races for President or with a heavily contested Senate race.
The cable industry was already under stress and this year ought to push it closer to the brink where the traditional cable model breaks. The industry isn’t to that brink yet and over 60% of homes are still subscribing to traditional cable TV. But as that number drops, many of the industry paradigms are going to break and the industry will either have to reinvent itself or undergo the slow death that we saw with residential landlines.