So much can happen in a year.
The Federal Communications Commission (FCC) has published its 17th report on competition in the video marketplace, but by relying on research from 2014, many of the report's findings are already out of date. In its analysis of video subscriber numbers, the FCC reports that total cable video households dropped from 55.1 million to 53.7 million between the end of 2013 and the end of 2014, while telco video subscriptions rose from 11.8 million to 13.2 million during the same time period.
In 2015, however, telco video subscriber growth shrank dramatically, while cable operators made up some of the difference in market share. In the fourth quarter of 2015 alone, Verizon Communications Inc. (NYSE: VZ) added only 20,000 video subscribers compared to 116,000 video subscribers in Q4 2014. AT&T Inc. (NYSE: T) gained 214,000 satellite subscribers through its DirecTV subsidiary in the same quarter, but lost a whopping 240,000 U-verse video subscribers to end the year. (See Verizon Feels Cord-Cutting Pinch and AT&T Eyes TV Everywhere Gold .)
The FCC report also comments on several trends that expanded between 2013 and 2014, but its numbers don't take into account the impact of numerous market changes that have occurred in the 17 months since. For example, the Commission's report notes that cable video revenue increased between 2013 and 2014 from $61.5 billion to $62.3 billion, but that video profit margins among the largest cable operators nonetheless dropped from 19.2% to 17.3%, largely due to increasing programming costs.
As bad as that sounds for cable companies, the reality today is likely worse. In March of this year, CBS Corp. (NYSE: CBS) predicted that it will earn $2.5 billion in video licensing revenue by 2020, a move that it hopes will counter plummeting TV ad revenues. More licensing revenue for broadcasters means increasingly higher costs for distributors, particularly in the near term. While growth in the number of distribution sources (Netflix, Amazon Prime Video, etc.) should ultimately help spread some of those costs around, it may not happen in time to save the video operations of smaller and independent cable and telco TV companies.
Earlier this year, several small-to-midsized cable operators reported that they are prioritizing broadband investments over further development of their video services. (See Why D3.1 Isn't on Every Cableco Agenda.)
The FCC report does make mention of several new online video options launched over the last year and a half including Sling TV, Go90 and standalone services from programmers like HBO Now. However, there is little analysis of the impact of these offerings on the market.
As an historical record, the FCC report on video competition provides a useful set of data. As a tool for evaluating the state of the market today, the report fails to keep up with Internet-speed development, and the rapid changes that now take place not only from year to year, but from month to month.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading