The way in which people consume entertainment video has a broad impact. This seems odd. After all, why would whether people watch a program via a traditional cable package or an over the top (OTT) service matter to enterprises mapping out their telecommunications buys?
The short answer is that it will matter if the trend accelerates. Massive changes in how people access programming will affect the level and type of investment that network owners make in their networks. For instance, a massive exodus from wired to wireless would tend to move capex in that direction. Likewise, great growth by over-the-top (OTT) providers would lead infrastructure providers to upgrade their quality of service (QoS).
This impact would only be felt if the changes are significant. The latest “Cord-Cutting Monitor” report from MoffettNathanson LLC suggests that the trend, in which subscribers leave traditional cable subscriptions for alternative delivery means, is growing. U.S. providers, the report said, lost 941,000 subscribers in the second quarter. That is far more than the previous record, which was 809,000 subscriber losses during the first quarter of the year.
The signs are that the trend is growing:
As a result, the US cable, satellite and telecom industries have now lost more than a combined 1.7 million traditional pay-TV customers in just the first half of this year. Plus, the annual rate of subscriber losses for the industry accelerated to 2.7% in the spring quarter, up from 2.5% in the first quarter. Meanwhile, the rival OTT skinny bundle providers, or virtual multichannel video programming distributors (vMVPDs), fared well, gaining an estimated 469,000 paying customers, or about 50% of the cord-cutters fleeing the legacy pay-TV bundles.
The established programmers are proactively seeking to protect themselves. For instance, last week, The Walt Disney company took a 33 percent stake in BAMTech, a video streaming company that was started by Major League Baseball. The price is $1 billion, to be paid in two installments.
The press release says that BAMTech’s OTT clients have almost 7.5 million paid subscribers. That number likely will rise: The goal is for ESPN to launch a streaming service that will feature programming from both companies and include live regional, national and international sports events. Programming that appeared on ESPN’s linear networks will be offered. No time table for the service was announced.
Cable operators are also hedging their bets and strategizing as consumer tastes change. On its earnings call late last month, Comcast discussed plans for Xfinity Instant TV. The planned streaming service, which may be launched by the end of the year, would not require a cable box. Earlier reports, according to The Hollywood Reporter, said that the cost would be about $15 per month. The story says that pricing tests are ongoing. The earlier reports also said that the target would be subscribers to Comcast’s broadband service who don’t buy content from the company.
There is no reason for IT and telecommunications executives to follow changes in the Pay TV world extremely closely. However, it is something to keep an eye on in a more general sense. Entertainment video is a cash cow for broadband providers. Significant changes in how that money flows will have impact, especially if the broadband provider has a programming arm.
Carl Weinschenk covers telecom for IT Business Edge. He writes about wireless technology, disaster recovery/business continuity, cellular services, the Internet of Things, machine-to-machine communications and other emerging technologies and platforms. He also covers net neutrality and related regulatory issues. Weinschenk has written about the phone companies, cable operators and related companies for decades and is senior editor of Broadband Technology Report. He can be reached at cweinsch@optonline.net and via twitter at @DailyMusicBrk.
