Comment (0)A recent opinion piece in The New York Times proclaiming that "Cable TV Is the New Landline" raised a few industry eyebrows. "People have been predicting the death of cable TV for a long time, but this really might be it," the newspaper's Shira Ovide wrote earlier this month.
There's no arguing that the numbers paint a dire picture for US pay-TV. In its latest report on the industry, MoffettNathanson found that US pay-TV providers lost another 637,000 subs in Q3 2021. Gains by virtual multichannel video programming distributors (vMVPDs) once gain were not nearly enough to make up for the consumers who are fleeing from traditional pay-TV providers – cable, telco and satellite TV – in droves.
Boiled down further, pay-TV's penetration rate dipped to 69% of US TV households, down from 78% at the end of Q3 2019, according to MoffettNathanson estimates.
MoffettNathanson analyst Craig Moffett has also taken a stab at where the "floor" for pay-TV might be, speculating that the 58 million sports-viewing households in the US could be it. And while sports may be the glue holding the pay-TV bundle together, its grip is loosening.
Moffett holds that if Disney opts to move ESPN fully to a direct-to-consumer (DTC) distribution model (going beyond today's ESPN+ add-on), it could "trigger a complete collapse of the system."
"What may be a terminal decline of America's cable TV industrial complex is a big deal," Ovide wrote in the aforementioned New York Times column. "It shows that technology can change entrenched ways of doing things slowly, and then suddenly, with profound ripple effects."
Lou Borelli, a cable industry vet who now serves as CEO of the National Cable Television Cooperative (NCTC), reacted strongly to the column on LinkedIn. He asserted that the "author is clueless as to the fundamental flaws of business models and regulatory exploitation that are the root cause of the 'unbundling' of television." Borelli argued that "technology is facilitating this shift, but guaranteed distribution content contracts, broadcast retransmission consent and the explosion of sports rights created an unsustainable cost model that has turned linear video into a loss leader."
Cable operators, he adds, "are pivoting to broadband first," with streaming services becoming a "safe haven for big media content creators." Borelli makes some correct and salient points, though calling the Times author "clueless" is a bit harsh.
'Cable' is too limiting
But the one nit to pick is the column's focus on "cable TV" as some sort of catch-all label – the use of the word "cable" even within the industry itself is headed toward extinction. And to imply that the problem is cable's alone is at the very least shortsighted, as cable is far from the only industry bearing the burden of pay-TV's fractured business model. Every facet of the pay-TV market is feeling the pain.
Borelli's assertion that cable operators – large, small and in between – have pivoted to a "broadband first" stance is certainly correct, and it's been a long time coming.
Just read what former Cablevision Systems CEO James Dolan was predicting in 2013 and review some of the "dumb pipe" chatter expressed by a few of the nation's smaller, independent cable ops back in 2010. Mike Lovett, former CEO of Charter Communications, also spoke of a broadband-first footing in late 2011. The year before, Glenn Britt, the late chairman and CEO of Time Warner Cable, referred to broadband as the company's core product too.
These days, broadband-first is all the rage, even as the specter of slowing broadband subscriber growth starts to emerge. Cable One, WideOpenWest, Comcast and many others have put high-margin broadband at the center of their businesses and de-emphasized pay-TV by partnering with streaming providers, not promoting their own services heavily, or not bothering to retain video customers with steep, unprofitable discounts. Others have bugged out of the pay-TV biz altogether.
And that's just a small piece of it. Here's an illustrative glance at how not just cable, but the telcos, the satellite guys and even the vMVPDs have adjusted to remedy, or at least ease, the pay-TV malaise.
Meanwhile, the troublesome dynamics of the pay-TV model have even forced some vMVPDs to change their stripes. After hitting the market as a low-cost, slimmed-down, no-contract alternative, they have retained that no-contract piece. However, almost everything else has changed as to turn even a small profit, many vMVPDs have been forced to raise prices as their channel counts grew.
Meanwhile, we've seen vMVPDs such as YouTube TV get mired in the same kind of programming and carriage disputes that have afflicted the traditional players since I was in short pants.
And that's to say that streaming and technology are not the magic bullets that can fix all that ails the pay-TV business. The business is the business, and that business is in a serious state of disrepair.
— Jeff Baumgartner, Senior Editor, Light Reading
