Cable Not Seen Axing Linear Video Anytime Soon, Despite Eroding Subs

Video subscribership at the largest publicly traded cable operators -- Comcast, Charter Communications and Altice -- fell 15.1% between Q1 2018 and Q1 2022. They had a combined 34.8 million subs at the end of the most-recent quarter, vs. 41 million five years earlier. Comcast and Altice each saw roughly 20% drops in that span, while Charter's was 8%. Mid-sized cable operators have seen similar sub slides. WideOpenWest over the same five-year span saw a decline in video revenue generating units from 429,000 to 142,000, while Cable One went from 334,000 residential video primary service units to 225,000. Cable One said earlier this year it would end its bulk video offerings to places like hotels and condominium buildings, citing its unprofitability (see 2202250051).

The year 2020 saw an acceleration in cord cutting at MVPDs, as the COVID-19 pandemic left people both with more time on their hands and rethinking their bills and spending, said M Science analyst Magalie Grossheim. This year looks like year-over-year cord-cutting rates will be returning to pre-pandemic levels, judging by the percentage of cable subscribers cutting their spending, she said. She said the cable industry isn't likely to drop video from the bundle in the near future, though a changing broadband competitive landscape, such as increased competition from fixed wireless, might change that dynamic.

"Video is not dead," though the traditional pay-TV marketplace "has been challenging" and it's tough to remain price-competitive with other sources of video, National Cable TV Cooperative CEO Lou Borrelli told us. There's a continual decline in subscribers, "but I haven't heard anybody willing to predict where that floor is," he said. While some NCTC members, particularly in rural areas, are migrating out of video and looking at over-the-top or IP TV alternatives, video for the time being will remain a loss leader for many cable operators, with broadband being the business focus, he said. Much of that is driven by the need to offer competitive video service in competitive markets, he said.

"We are going to continue" in video, Comcast Cable CEO Dave Watson said earlier this month at a MoffettNathanson investor conference. "We are not going to chase unprofitable video relationships, [but] we are imagining what video is. So yes, we will lose video ... on the linear side. We are still going to offer it." He said Comcast's traditional linear video subscriber numbers, when added to users of its Flex streaming aggregation service, are close to its pre-pandemic video subscriber numbers. Altice CEO Dexter Goei at the MoffettNathanson conference said its video focus is on pricing, "trying to improve those economics."

"The market is forcing us to de-accentuate video service whether we want to or not," emailed Tom Larsen, Mediacom senior vice president-government and public relations. "We obviously still sell video, but high-speed broadband is the primary product we are marketing to customers. Given that programmers still seem committed to raising rates year after year, it would be extremely difficult to stop the cord cutting trend. Now that consumers can pick and choose their favorite streaming services a la carte instead of in a once size fits all bundle, I think it would be especially difficult to reverse course."

Video remains an important business at Ohio's MCTV and it isn't having conversations yet about ending the service, President Katherine Gessner told us. While video penetration among MCTV customers has dropped from 65% to about 30% over the past few years, "it's still an important business for us [though] it gets harder and harder for it to remain profitable" in the face of increasing programming costs.