Video services

Cable's Slippery Slope

11:35 AM -- Cable’s dominant share of the U.S. multichannel market will continue to erode, caused in part by growing interest in broadband-fueled over-the-top (OTT) video services, according to a new forecast from SNL Kagan . (See Cable on Path to Shed More Video Subs.)

According to SNL Kagan's projections, cable TV will drop from 63.2 million subscribers in 2009 to 60.7 million in 2019, with the direct broadcast satellite (DBS) sub base expected to grow from 32.2 million this year to 33.6 million in 2013. But even the longer-term expectations for DBS aren't all that rosy, as its combined sub base is expected to fall to 33 million in 2019.

The big video winner appears to be the telcos, which could see their video base jump from 5.7 million to 16.7 million, based on SNL Kagan's 10-year outlook.

What's significant here is that the telcos, including Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T), continue to perform well against the MSOs wherever their video footprints overlap and head-to-head competition is present. Both of those operators continue to launch their alternative video products within markets where their wireline services can be more easily converted to carry digital cable (and IPTV in some cases) and other offerings, including high-definition television, broadband, and wireless services.

While it's easy to blame cable's sluggish video growth on the economy and the specter of OTT, it's growing clear that they're losing ground to the phone and satellite companies. Comcast Corp. (Nasdaq: CMCSA, CMCSK), for example, lost 672,000 video customers in the 12 months ended June 30.

Note that Verizon’s FiOS architecture is quite expensive to build and is being launched in more urban settings with very high density markets, negating some of the risk in returns on capital investment.

DBS, as SNL Kagan points out, is expected to do well through 2013, but will begin to decline as 2019 approaches. I think this will come down to applications, broadband delivery, and content, where wireline providers have the advantage, but DBS will continue to do well in markets that are underserved by solid wireline-based service providers.

OTT video is expected to double from 2013 through 2019 as consumers seek out new alternatives. Cable companies have been downplaying this still budding trend, but I suspect it's a topic of contention within the confines of the board room. [Ed. note: And no doubt those discussions have led to all these 'TV Everywhere' initiatives, which aim to preserve cable's subscription video model. See Comcast Nears 'TV Everywhere' Launch.]

What does the report indicate as a long-term trend? The cable industry will lose ground to telcos and OTT, but will continue to dominate the overall wireline market. Urban markets will reap the most benefits from competition, while the underserved markets will have to contend with whatever is left over to fill the void.

— Leonard Grace, a cable industry vet, is a telecom strategist and blogger. He can be reached at [email protected]. Special to Cable Digital News

LeonardGrace 12/5/2012 | 3:54:13 PM
re: Cable's Slippery Slope

It is of interest to note per SNL Kagan's Trend Report, that although Telco's and OTT videos services have significant gains through 2019, cable continues to be the dominate player losing only 3 million customers during the period.

Evidently Kagan predicts most gains from alternative cable offerings will be from newly added customers, and not necessarily through direct competition.

Sign In