Death of Cable

One of the things I think will be very interesting to watch over the next decade is the breakup of the cable monopolies. By that I mean the end of forced subsidies through the cable bill. I doubt we ever see multiple cable outfits servicing the same area. What we wil see in most areas is at least one satellite operator, a cable provider, a fiber company and a wireless company offering combinations of voice and data. TV will be offered as a part of the data package as just another internet service. Consumers will shop the providers based on their needs. Metered service will become common.

As is always the case, some areas will have several choices, while others have one or two options. A big city like New York will not have DirecTV, but Boise Idaho will not have fiber or cellular. More important, the content  will be unbundled from the pipe. Instead of paying Comcast $120 a month for TV and Internet, you will pay Comcast $50 a month and buy the content you  want from a broker or the originator.

The content providers are fighting this hammer and tong. The reason is they are currently making hundreds of billions from people who don’t want their product. Take a look at ESPN. They make $9 billion a year in revenue. Two thirds of that is from subscriber fees. Most estimates say that roughly 20% of households watch ESPN. Yet, 100% pay $8/mo to ESPN as it is part of the basic cable package. As soon as those folks get the chance to cut their bill by $70 a year, they will take it.  This Atlantic story goes into the details.

Of course, those billions coming out of cable bills into the channel operators like ESPN, Yes, NESN and FoxSportsNet will force them to change their business models. They will recoup some through other means like higher fees, but most of it will come through downsizing. Part of it means lower fees content suppliers, like sports leagues and syndication companies. It also means smaller players will have great access to customer and thus create alternative media. Live streaming will be the next big thing.