To hear the prognosticators and media tell it, cable subscriptions are being supplanted for video services like Hulu. A recession, free Web video and cable costs add up big problems for cable providers. The reality may be very different, says Bernstein analyst Craig Moffett.
In a research report, Moffett notes:
Amid all the prognostications of disintermediation of the gatekeepers and families disconnecting (expensive) Pay TV in favor of (free) Hulu.com, it is noteworthy that the number of Pay TV subscriptions in the United States actually grew in Q4. And this in the midst of the worst recession in three generations. The final numbers won't be known until Dish Network (and a few others) report, but at least based on the data from those video providers who have reported thus far – a group comprised of the TelCos, DirecTV, and the three largest cable operators – there were 441K subscribers more families paying for Pay TV subscriptions at the end of the Fourth quarter than there were at the start. That compares to 396K subscribers added in the Fourth Quarter last year by the same group.
Moffett then follows up with this chart:
The takeaway: Cable is losing subscribers...to satellite TV and telecom providers. That means the hubbub about Web video denting cable companies and spooking the hell out of giants like Comcast and Time Warner Cable may be misplaced. Web video isn't killing the cable star yet. However, cable does seem quite busy reportedly cooking up ways to take its on-demand video to the Web too.
Video cord cutting – notwithstanding comments to the contrary from Time Warner Cable CEO Glenn Britt, who cited cord cutting as a headwind – still remains the province of urban myth. It certainly sounds plausible enough… but there's simply no empirical evidence that it actually exists.
The argument here is that consumers are hanging on to cable subscriptions, but cutting voice lines. Web video may have its day, but not yet. The operative word may be yet.
Will Web video really supplant cable subscriptions?