While the sky may not be falling quite yet, Cablevision Systems CEO James Dolan sees the traditional pay-TV business steadily declining over the next decade as OTT video gradually captures more and more of the market.

Speaking on the company's second-quarter earnings call Friday, Dolan said he doesn't believe that consumers are dropping their traditional cable bundles in droves right now for OTT à la carte and "skinny bundle" packages. He argued that cable bundles remain compelling to most consumers because of all the programming choices the "very efficient" bundles offer for one combined price.

"I don't think the sky is falling quite yet," he told analysts on the call. "There's not enough programming weight yet in the Internet and in the OTT services that are out there to really entice a mainstream video consumer… I don't think we're going to see a landslide of consumers move from one to another."

Dolan added, however, that a shift away from traditional bundles will increasingly happen over time as the various OTT offerings bulk up with more attractive content and pay-TV bundle prices continue to climb. He predicted that it would take at least five years for 10% of the pay-TV market to move over to OTT and ten years for 30% of the market to make the switch.

"I do think eventually there will be enough programming for OTT to be competitive with the traditional video bundle," he said. "But this is not something that I think is going to happen over a very short period of time. Consumers have become very comfortable with the bundle cable is offering."

Cablevision Systems Corp. (NYSE: CVC), the fifth largest cable operator in the US with 3.1 million total residential customers, has been a leader among the major MSOs in embracing OTT. Earlier this year it became the first pay-TV provider to sign up to distribute HBO Now, the popular new à la carte streaming service from Home Box Office Inc. (HBO) . At about the same time, it also became the first US pay-TV provider to sign up to carry Hulu. (See The Race Is on for Skinny TV and Cablevision Embraces OTT With Hulu.)

In addition, Cablevision has introduced new Optimum broadband service packages with over-the-air digital antennas designed for "cord-cutters." Plus, Dolan has broadly hinted that the MSO might launch its own slimmed-down OTT package shortly. "We recognize that the traditional video bundle does not work for all consumers," he said on the call. (See Cablevision 'Cord Cutters' With New Package.)

Want to know more about pay-TV subscriber trends? Check out our dedicated video services content channel here on Light Reading.

Dolan's remarks about OTT's burgeoning prospects came as the company continues to tout broadband services, not conventional pay-TV, as the key to the company's, and the cable industry's, future. Although Cablevision hasn't gone as far as such other large MSOs as Cable One Inc. in shifting its emphasis from conventional video to broadband, Dolan has made it clear that broadband connectivity will be the company's winning formula for the next few years. "The outlook for data is very strong," he said on the call.

With that emphasis in mind, Cablevision added 14,000 broadband customers in the seasonally challenging spring quarter, reversing the loss of 9,000 data subscribers in the year-earlier period. The gain boosted its total broadband customer base to nearly 2.8 million.

At the same time, Cablevision cut its video subscriber losses to 16,000 in the second quarter, an improvement over its loss of 28,000 video subs in the year-earlier period. As a result, it closed out June with more than 2.6 million video customers, about 144,000 fewer than its total of broadband customers. Dolan credited the better customer metrics in the quarter to the company's greater network reliability, noting that it has cut both truck rolls and customer calls over the last three years.

Despite the fact that Verizon Communications Inc. (NYSE: VZ)'s fiber-fed FiOS platform overlaps much of the Cablevision New York-area footprint and has competed fiercely for video and broadband customers, Dolan shrugged off Verizon as a serious long-term rival because of its high marketing and other operating expenses. "We believe Verizon FiOS is an unprofitable business, and we doubt that they will ever be profitable," he declared.

— Alan Breznick, Cable/Video Practice Leader, Light Reading