Barclays analyst Kannan Venkateshwar said that after a second quarter that saw a high level of pay-TV subscriber losses, the cord-cutting phenomenon is far from done.
In a report, Venkateshwar estimates that 31 million homes could cut or shave the cord over the next decade, with some individual networks declining at an even faster pace.
Internet-delivered bundles—such as Dish’s Sling TV, DirecTV Now or YouTube TV—could gain 17 million subscribers over the next 10 years.
But the financial impact of the loss of subs from high-priced traditional pay TV to cheaper and skinnier online bundles could be a $13 billion decline in affiliate fees over the decade.
“In our opinion, media companies are looking at all forms of distribution from the same narrow lens of affiliate fees. However, there are significant differences in emerging OTT business models and incentives for new entrants vs legacy distribution,” Venkateshwar said.
He said the differences include shifts in consumer inertia becoming frictionless and TV not being about the television screen anymore.
“Eventually, we believe some OTT models will become indistinguishable from legacy media while others will result in consumers watching TV without realizing that it is the activity that they are engaged in,” he said.
“We believe media companies should adapt content to distribution instead of the other way around, use a ‘barbell strategy’ for distribution and tier services based on experience instead of content,” he said.
On the legacy media side, he said CBS and Comcast are ahead of the curve in some ways.
“In terms of models that face the most challenges, it is tough for us to imagine a world where all the 200-plus cable networks in existence today remain viable.”
