The Industry

A Bad Year for the Cable Industry

The traditional cable TV industry had a miserable 2019. Collectively the biggest cable TV providers lost over 5.9 million subscribers during the year, almost 7% of the total customer base. The impacts of COVID-19, along with the already existing trends in the industry spell bad news for the industry in 2020.

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.


Live Streaming on the Internet

I wrote recently about how Sling TV had problems with the NCAA basketball games, and particularly with the final game between Kentucky and Wisconsin. I watched the Maryland games in the first two rounds of the tournament and reported how awful my experience was.

But Sling TV is not the only one to have trouble with live streaming. I recall last year when HBO Go had a terrible crash with the streamed season premier for Game of Thrones. And the Oscars last year also failed when ABC tried to stream the event.

Live streaming is just that – it’s when a live event is being put over the Internet in real time. This is opposed to the way that Netflix, Amazon Prime, and other online services stream. When you watch one of those services they send a big burst of data at first and they provide enough download to stay a few minutes ahead of your viewing. As you watch, they stream more and try to stay ahead of you. Since you are watching a cached copy of what you have already downloaded the viewing experience is always a good one.

In these three above examples of live streaming problems the companies blamed the issue on unexpected demand. Certainly there might have been millions watching the Oscars and Game of Thrones, but Sling TV had maybe 100,000 viewers of the final four. And I’ve had problems watching less popular sports events on Sling TV where they probably didn’t have more than few thousand viewers.

I really can’t buy the excuse that the live streams failed because any of these companies had too many viewers. That’s a good excuse to hide behind. But in reality they only send out a small number of live streams to the world – it’s not like they initiate a stream for every viewer who is watching. They instead send a stream to the backbone carrier, such as Cogent or Level3 with whom they are interconnected. A company like HBO might also have direct peering with Comcast and a few other large cable companies and telcos. But most programmers that do live streaming are handing off the live stream to an underlying carrier.

Their problems are going to begin if they hand off everything as routine traffic to an underlying carrier. Unless a content provider requests some sort of priority treatment of their streams then it’s going to be treated like everything else on the web. One would imagine that the stream of a major event is going to end up being sent to nearly every one of the thousands of ISPs in the country. And many of them are far down the Internet food chain and get their bandwidth via numerous hops from one of the main ISP POPs.

There are streaming events that have been successful. Consider the Olympics online. There, NBC transmitted not just one event, but many at the same time, and at least at major ISPs the reports on the quality were very positive. It’s almost certain that NBC paid extra and made arrangements to make sure that the Olympic stream had a high priority through the backbone. In case you are wondering if that is against net neutrality, it is not. Net neutrality looks mostly at the customer side of the network while carriers are allowed to pay for arrangements needed to make their service operate as intended through the backbone.

The reason that you don’t hear ISPs commenting on the issue is that some of the streaming problems come from your local ISP. The issue that most affects streaming video is latency, and ISPs are all over the board when it comes to latency. Latency is the average time it takes a signal to get to you, and ISP networks can have hardware, software, and routing practices in place that result in increased latency to the signal. And as mentioned earlier, one of the biggest sources of latency is the number of hops a signal has to take on the web between its source and a given network/end user.

When I lived in the Virgin Islands the latency was horrendous as we were at the end of the Internet food chain in North America. But a lot of rural places and rural ISPs in the country also suffer from poor latency because they buy their internet from somebody who buys from somebody else and they might be half a dozen carriers deep in the delivery chain.

The final source of a bad viewing experience can come from your home. You may have an old or outdated cable modem, or if you are using WiFi to get internet to your viewing device you might have a lousy WiFi router. So even if a good signal makes it to your house, your own gear might be gumming it up. When Sling TV got a universal thumbs down for doing poorly we know that they had big problems at the originating end, and they probably did not elect to pay for a premium routing of the event. But unfortunately for live streaming companies, there are always going to be customers who have a bad experience for reasons out of the programmers’ control. It might be a long time until the whole Internet is ready for high quality live streaming.

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