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The Erosion of Cable TV Subscribers May Soon Become A Deluge

This article is more than 5 years old.

The erosion of traditional Pay TV is continuing but when a realistic broadband Internet alternative becomes available, the erosion may become a rout.

The latest data from eMarketer (see here) is showing that cord cutting is accelerating but not by enough to panic the cable TV companies. eMarketer’s data shows a slight acceleration in the decline of cable TV subscribers to 3.8% from 3.4% in 2017, indicating that the integration of traditional services with those of Netflix have not really had any impact. There will still be 186.7m US adults watching cable TV in 2018, meaning that the business is still very large despite its continual decline.

This scale is likely to mean that the warning bells have not been headed in cable TV’s corridors of power although it does seem to have realised the importance of content. This is why the sector is locked in a big wave of vertical consolidation.

Content is king and if the content that users want and are willing to pay for is freely available on the Internet, then there is very little point in paying for $100+ for a cable TV subscription. This leaves the cable TV companies with only fast and reliable broadband Internet access as a desirable product. This can already be observed as 56% of cable TV subscribers only keep their subscription in order to get access to fast and reliable internet (see here)

This is also under threat as one of the best use cases for the new wireless technology known as 5G is fixed wireless access. 5G’s ability to use huge blocks of unlicensed spectrum combined with sophisticated tricks with radios and antennae would enable cost-effective competition with both fibre and cable delivered internet access. Furthermore, with no requirement to dig up the roads and (potentially) user-installed receiving units, the cost to roll it out would be far lower. This would make it possible to have very competitively priced internet-only access in the USA for the first time. With this scenario, the cable companies will either have to cut their prices massively or face losing most of their business.

It at this point that the gradual decline may become a deluge as the last reason to subscribe to cable TV will have been removed. This represents an existential threat to the cable tv industry that will need to rethink its proposition to survive. The result will be much smaller, more innovative but less profitable cable companies offering better customer service than they do today.

The alternative is to be remembered as case studies of dominant companies that fell by the wayside because they refused to move with the times. It is unlikely that many of their customers would be sad to see them go.

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