Cable Technology Feature Article
Multichannel Video Entertainment Business Continues to Slowly Shrink
By Gary Kim, Contributing Editor
Some trends in the communications and entertainment business are irresistible. Incumbent telcos losing voice customers and cable TV companies losing video customers are among the trends that seemingly are inescapable.
As always, there are trends within the trends. Telcos operating fixed networks have lost huge chunks of market share to mobile service providers who provide a substitute product, to over the top applications and secondarily to other rivals such as cable TV companies.
So far, the video losses sustained by cable TV operators have mostly been to telco and satellite rivals, in a market that is declining slowly.
Cable operators lost 687,000 subscribers for the first three quarters of 2013, while competing satellite TV and telephone companies picked up about 574,000 subscribers,
In the third quarter of 2013, the traditional subscription TV industry lost a net 113,000 subscribers, compared with 101,000 in the third quarter of 2012, according to a MoffettNathanson report.
Keep in mind that the U.S. multichannel video business has some 100,400,000 or so total customers. So the loss of about 100,000 a quarter is relatively minor. Still, the market is shrinking, slowly.
But a tenth of a percent quarterly decline is nothing like the rates at which telcos have become accustomed to losing voice customers, which is on the order of as much as one percent a month, or an order of magnitude higher than video customer losses.
Also, the dynamics of the video business losses arguably are different from fixed network voice customer losses. In the case of voice, the main trend has been widespread adoption of mobile voice as a product substitute.
There is no direct substitute for fixed network video service, yet. Also, household formation, which has been challenged since about 2006, historically has been a driver of video service adoption. As housing formation has slowed, so has the incremental demand for video subscription services.
One might say video subscriber attrition is a problem, not a crisis. Up to this point, streaming services such as Netflix have been used “in addition to,” and not mostly “in place of” traditional video services.
But younger consumers more frequently do precisely that. The video subscription business won’t really reach a crisis until losses start to reach the 12 percent a year rate. But not many would bet against that happening.
Edited by Cassandra Tucker