DENVER -- Cable Next-Gen Technologies & Strategies -- Assessing the US cable industry's competitive position isn't so much a matter of deciding if the glass is half-full or half-empty as choosing how to size the glass, according to Light Reading Cable/Video Practice Leader Alan Breznick. In his annual assessment of the video and broadband markets in which cable operates, Breznick points out that cable is making share gains in both markets, even as one -- pay-TV -- is shrinking and the other -- broadband -- is growing because of telco shortcomings.
"The pay-TV pie is definitely continuing to shrink," Breznick told the crowd assembled here for the tenth annual event exploring what lies ahead for the cable industry. "But cable is holding steady in terms of its video reign, so its market share is actually improving among pay-TV providers because satellite and telco TV providers are losing customers even faster. By contrast, cable has narrowed its video losses to the lowest in a decade -- and because it is losing less, cable is gaining market share."
Cable ended 2016 with 52.7 million video subscribers, according to SNL Kagan , a drop of less than 1% of its base. That leaves cable with a still-commanding 53.9% market share, versus 34% for satellite TV and just under 12% for telco TV.
The current state of the video market is hardly cause for celebration, however, as streaming video continues to take hold. In fact, more consumers now subscribe to either free or paid streaming services than subscribe to traditional pay-TV services overall, Breznick noted, and that trend is building up a head of steam.
Breznick cited other market data indicating that US pay-TV providers lost 1.7 million video customers in 2016, up from a loss of 1.1 million in 2015, according to MoffettNathanson LLC . He said another 20% of existing cable customers are dissatisfied with their current service, according to Parks Associates . Moreover, for the first time, more US households use streaming video (68%) than subscribe to a pay-TV service (67%), according to the Consumer Technology Association.
"It's no longer just Netflix; we are seeing other OTT services start to scale, such as HBO Now and CBS All Access," he commented. One-fifth of streaming video subscribers pay for three or more services -- essentially creating their own service bundles, according to 451 Research.
Just as worrisome is the proliferation of OTT video skinny bundles -- pay-TV services from DirecTV, Verizon, YouTube, Sony and more that package a smaller subset of cable offerings at a much lower price ($20 to $35) than the typical cable offering.
"Those are the ones that cable operators have to worry about because they are slimmer, cheaper versions of cable packages," Breznick said. "It will be really interesting to see whether those skinny packages hit the sweet spot -- if they get the packaging right and produce something with market traction. If they do, they could make a huge difference."
On the broadband side, the news is good -- and with fewer caveats. Broadband has definitely become cable's bread and butter -- and cable has become the dominant broadband player with 62.9% of the US market. Much of that is attributable to telecom providers' loss of DSL subscribers at a faster pace than they can add fiber-based broadband subs, Breznick said.
He doesn't think that's reason for complacency: The gigabit era is taking hold and more players, led by complink 502|AT&T Inc.}, are pushing fiber-to-the-home to deliver those services. Notably, Comcast Corp. (Nasdaq: CMCSA, CMCSK) actually tops the list when it comes to delivering speed over fiber with a 2Gbit/s service.
But the real cable play here is DOCSIS 3.1, Breznick said, since that will enable cable operators to deliver gigabit speeds over their existing hybrid fiber-coax plant.
— Carol Wilson, Editor-at-Large, Light Reading