Why Streaming May Have Missed its Chance to Kill Cable Once and For All
Cord cutting is continuing, but there are still over 1 billion pay-TV customers around the world.
Americans are leaving cable. It’s hard to escape that conclusion, especially as the top pay-TV providers in the United States lost 1.8 million customers combined in the third quarter of 2023. But one analyst at the global analysis and advisory firm Omdia says that people shouldn’t be writing cable’s epitaph just yet.
- Omdia senior principal analyst Tony Gunnarsson spoke about the relationship between streaming and cable at the 2023 Asia TV Forum and Market in Singapore.
- Gunnarsson pointed out the low average-revenue-per-user (ARPU) model of streaming makes it unlikely to directly challenge cable.
- Cable and streaming are likely to pursue a more symbiotic relationship, as seen in the Disney-Spectrum carriage deal.
Cable Out, Streaming In?
Speaking at the 2023 Asia TV Forum and Market in Singapore this week, Omida senior principal analyst Tony Gunnarsson explained his reasoning for thinking that streaming won’t outright replace cable any time soon. Gunnarsson pointed out that there are still over one billion pay-TV customers around the world, and that revenues of $195 billion+ annually can’t be ignored. Subscription video-on-demand (SVOD) services like Netflix and Hulu simply can’t deliver providers the same type of ARPU as cable plans can.
“SVOD has proven to be a great vehicle for unbundled access to TV and movies, but the low ARPU [average revenue per user] nature of the SVOD model is increasingly being seen as flawed,” Gunnarsson said.
Indeed, Netflix has an ARPU of over $16, one of the highest in the streaming world. Conversely, cable plans bring in around $70 per customer or more, and that extra revenue allows cable providers to pursue content (namely live sports) that is out of the price range of most streaming platforms for the present. That’s why the majority of the NBA’s games in its next broadcast deal will still be on linear TV, despite the clear desire of the league to make more games available to streamers.
The cost of sports might be the biggest hurdle streamers won’t be able to overcome when trying to replace cable. Leagues are clearly trying to give streaming services a chance to carry their games; the fragmentation of sports rights currently happening makes that clear. But sports leagues are hesitant to jump all the way in with a streaming service, with the notable exception of Major League Soccer, which will show the vast majority of its games on MLS Season Pass for the next decade.
Will Cable and Streaming Have to Work Together?
It’s possible there might have been a time when streaming could have supplanted cable once and for all. But that time is almost certainly passed, because the numerous SVOD platforms out there have thus far refused to bundle together in any meaningful way. There are over 2 million titles available to stream these days; the content is there, but it’s too spread across in the current streaming ecosystem for streamers to challenge cable as individual entities.
“We could have created a platform where all the big streaming services existed, but we had to enable the telcos to do that for us,” Gunnarsson explained. “It’s quite clear why that is happening. The big next generation direct-to-consumer streaming services that depend on access to audiences of scale that can only be reached through telco and pay TV partnerships.”
In other words, since streaming services did not aggregate to offer a super-streamer with a staggering content library when they had the chance, they’ll now be forced to work with cable providers if they want to build scale. Disney+, Netflix, Max and other streamers are not likely to find vast pockets of untapped streaming customers in the United States going forward, and carriage deals like Disney's recent pact with Spectrum might be the best way to gain scale for streaming platforms.
That deal allows Spectrum TV users to get no-cost access to ad-supported Disney+. Spectrum pays Disney a prorated lump sum for those viewers, and Disney gets to count Spectrum’s 15 million cable customers as Disney+ customers too. It’s not the ideal way for streaming services to gain scale, but it’s likely more providers will adopt similar agreements; Paramount has already signaled its willingness to enter into such deals in the U.S., and already does so in Europe.
Cable will almost certainly continue to lose customers in the short and long term. But the economics of streaming indicate it may have a tough time replacing cable altogether, and a more symbiotic relationship may be the best path forward for both streaming and cable providers.
Disney+
Disney+ is a video streaming service with over 13,000 series and films from Disney, Pixar, Marvel, Star Wars, National Geographic, The Muppets, and more. It is available in 61 countries and 21 languages. It is notable for its popular original series like “The Mandalorian,” “Ms. Marvel,” “Loki,” “Obi-Wan Kenobi,” and “Andor.”