Video, they say, killed the radio star. Content, they say, is king. But now we hear that cable companies are in trouble because of streaming, and Comcast is spinning off a bunch of its TV properties. I’ve gotten 44 comments on video streaming and content from operators since July first, eight of which were from cable companies, and here’s what seems to be going on, for Comcast, for cable, and for content.
First, linear RF video is a dead end, according to all but two operators (both cable companies). Even those two agree that in the long run, it’s almost certain that this original form of cable TV won’t withstand streaming competition, but most of the operators and all the cable players think that it will still be a service element for “three to five years.” The question isn’t so much whether that form of video could still be sold, as whether it would be smart to offer it when future video customers prefer a streaming service. One cable expert told me that they see broadband-only adds outstripping cable TV new customers by 2:1 even now, and expect that to go to 3:1 by the end of 2025. That’s important because this expert believes that when new adds favor broadband only by 5:1, they’d likely start shifting to a pure broadband model for service.
Does this mean cable companies would get out of the video delivery business completely? Over half the non-cable operators say “Yes!” but none of the cable types believe that. Is that wishful thinking, though? I think that depends on whether the cable company owns content provider assets.
A cable company or other operator has to pay for content if they’re going to charge for it. If they own content, they’re paying themselves for it, and if they do not, whether they want to sell it depends on two things. First, the spread between retail and wholesale content price. A small spread means little profit. Second, whether they can strike favorable content deals if they’re competing with the owner of the content as a retail provider.
Many content providers are starting to offer streaming on their own, as well as offering their stuff to aggregators like cable companies (in linear form) and streaming providers like YouTube TV or Hulu. That’s because they’d love to have the same retail/wholesale spread added to their own profit. Over time, 35 of the 44 operators (5 of 8 cable companies) believe that the big content producers will all offer their own streaming services, and in the very long term (over 5 years) will start to raise their prices for syndication of their content, even to the point where they’d not syndicate at any price.
Both my opening statements are true; video has killed pretty much everything as far as syndication of content goes, and video delivery dominates infrastructure planning requirements. What’s also true is that the Internet and the diversity of video content it offers has made it more and more difficult to promote individual content providers’ works unless they’re already well-known. That’s why Comcast is likely keeping NBC while selling off other lesser channels. The lid on pricing means a lid on revenues, which have to come from ad sponsorship, license fees, direct payments for viewing, etc.
Cable companies’ problems here are related to all of this. They have, in CATV cable, outside plant that has a relatively low pass cost (getting service out to the curb where new customers can be connected) but whose historical value has been in delivering linear RF, and which is a shared media. With linear RF, you push out scheduled content en masse. You can add broadband to this (as cable has done) but there’s a limit to the download and upload speeds, generally much lower than would be supported by fiber. To the extent that a given cable span is shared, the data capacity is also shared, and this means that widespread streaming, which is not synchronized by a schedule and comes from many sources, can stress out even a high theoretical data rate (DOCSIS 4.0 promises 10 Gbps maximum download speed). This means, say the cable companies who commented, that there’s pressure to shift to a future model where there is no cable spectrum spent on linear channel delivery, and less sharing of spans. All that means more investment. Given the risk of revenue pressure, that’s not a good thing. Given the slowing pace of adds for linear RF service, that’ particularly not good, because net adds are the net of new customers and losses to streaming services, and it’s likely in most areas that it’s the latter that cable companies worry about.
The video story isn’t all bad news to cable companies, though. Their current big fear is the FWA trend, because FWA has a pass cost as low, or lower, than cable. However, FWA is also a bandwidth-sharing strategy that could be pressured by a lot of streaming. In some areas, with some implementations, it has a greater risk of video congestion than CATV. Thus, a decision by cable companies to shift to a total-streaming model might be within the limits of CATV but put FWA at a disadvantage.
The long-term impact of streaming, though, is likely to be highly disruptive. Here are some other views expressed to me.
First, over two-thirds of overall comments and cable-company comments agree that Comcast will eventually spin off the remainder of its content. Wall Street agrees, I hear, because unlocking shareholder value is key and Comcast will need to offset infrastructure spending with something.
Second, linear RF will die off first in major, competitive, markets; likely first in Verizon’s territory. Where fiber is practical, telcos will deploy it and that will induce cable companies to compete in broadband, which in turn will mean that they’ll want the full RF spectrum of CATV for data.
Third, cable companies will start to specialize infrastructure for businesses, and to offer things like VPN or SD-WAN over business cable, when data-only CATV offerings come along, or perhaps even a little before. They’ll also likely lead telcos in offering things like edge computing.
In all, the operators expect a lot of market changes are coming, and that some of them will likely be visible toward the end of 2025.
