It’s that time of year where people look forward, and back, in Janus’s two-faced style, pondering what’s coming and what just happened.
And boy, is there ever something to ponder for the cable TV business: Will 2023 be the year the industry finally decides that providing cable TV is something someone else should worry about?
The coming year may be the first where a major cable TV provider stops selling, um, cable TV. Most such companies have been evolving away from the original basis of their business for years, especially by selling the fastest and highest-bandwidth broadband out there for home and business use.
But should a major provider like Comcast or Charter take the step of dropping cable TV, it would be a landmark in the industry’s history, and almost certainly won’t be the only such decision to come. And that has implications for the broadcast and basic-cable networks that will lose a source of revenue and reach even as they navigate a difficult transition to streaming.
Also read: Is Comcast Finally Giving Up on Pay TV by Putting NBC Affiliates on Peacock?
We’re already seeing hints that, to paraphrase one of the industry’s biggest-ever hits, Cable Winter Is Coming.
Comcast, the nation’s biggest cable company, reported that it had lost nearly 10% of its cable TV customers over the past year. The company has had more broadband than cable subscribers for years, but that’s only accelerating. In Q3, the company said it had signed up a record number of broadband customers.
Comcast has committed to spend more than $200 for each passing in its footprint to upgrade its network to multi-gigabit speeds by 2025.
Comcast, which more than most providers made early and active peace with the Netflixes of the world, is probably the least likely candidate to drop cable TV anytime soon, though. Its entertainment holdings include NBC, CNBC, MSNBC and a batch of other basic-cable networks. Its vertically integrated approach is a key tenet of Brian Roberts’s pitch to investors.
Also read: Comcast Announces First 'Live' 10G FDX DOCSIS 4.0 Connection
In fact, if I’m making 2023 predictions for Comcast, Roberts is more likely to double down on that content-pipe twin play, perhaps finally persuading Shari Redstone to sell all or parts of Paramount Global. I say parts because the two companies’ respective ownership of CBS and NBC won’t fly under FCC regulations. That becomes a divestiture-based buying opportunity for private equity or maybe Warner Bros. Discovery.
But Comcast is not alone in the cord-cutting, with other providers far less invested on the content side.
Already, market penetration rates for the entire industry have plummeted from nearly 90% of U.S. households to just 66%, easily the lowest level in more than a decade and down 5 percentage points in just a year.
That total looks better than it is thanks to the virtual MVPDs (Alphabet’s YouTube TV, Disney-controlled Hulu Plus Live, Fubo, Philo, etc.) plus what’s left of the satellite TV business. A Horowitz Research year-end report suggests just 51% of U.S. video-content customers get their TV fix through a traditional cable provider. Two years ago, that number was 81%.
Survey after survey suggests plenty more subscribers will be joining the cord-cutting cascade in coming months as they get more comfortable navigating connected TVs and streaming apps in the post-lockdown era.
Earlier this year, SparkLight (formerly Cable One) said it would stop providing bulk cable services to apartment buildings, hotels and similar venues. Getting out of the industry lets Cable One upgrade its high-speed data capabilities, while sparing it the “time and energy spent focusing on an unprofitable product offering.” Ouch.
And 2022 was the year that affiliate fee revenue finally dropped industrywide. For years, even as the customer base eroded, carriage and retransmission fees kept rising, keeping total revenue growth on the plus side. No more. Now the total is down, despite more fee hikes in the face of a fading economy and softening ad market.
None of this is to say traditional cable TV disappears completely, certainly not in 2023. Older media platforms have a way of not going away. AOL still exists. My 81-year-old mother, last I checked, still gets DVDs from Netflix. She still uses AM radio, for goodness sake. And DirecTV, too, more or less.
There’s still a profitable if sharply declining business serving those tens of millions of customers who still love the best of cable TV: convenience, a broad mix of programming, a single bill, and a customer-service provider you can (eventually) reach on the phone. Private equity certainly will take advantage of the change to buy up distressed assets that it can aggregate and milk for revenue until the bitter end.
And of course, the decision of traditional wired cable TV providers to be other things is really about them heading to the parts of their business that are higher margin, with longer-term growth prospects.
If they ditch cable TV, the companies will still make money off broadband, carrying everyone’s streaming apps, without the customer service and equipment headaches that providing video service entails.
Comcast, Charter Spectrum and other “cable” companies also have found a highly profitable niche selling bargain-priced mobile wireless services that undercut the big carriers. Dish Network’s Charlie Ergen looks pretty smart for his hard pivot into mobile over these past few years, even if the transition has been slow.
And there’s the whole smart-home revolution, which should accelerate now that Apple, Amazon, Samsung and Google have gotten behind the Matter standard.
Consumers want to get into automated and remote-controlled home security, lighting, door locks, heating/cooling, and other services. But they need a capable pipe, reasonable price, and help integrating it all. Matter matters, and the broadband providers have the customer relationships, in-home networking expertise, and promotional reach to take advantage.
With all those other ways to make money, it may be time to simplify some business models. Let YouTube TV et al deal with never-happy customers, regulatory headaches, and entitled media companies and broadcasters expecting endless annual fee hikes.
Soon enough, some cable TV company will say, “enough,” and transition to becoming “just" a broadband/mobile/smart home services company. Who’s it going to be? Maybe we should start a dead pool. Any bets on your end?
