KANSAS CITY, Mo. — A group of analysts tried to persuade the cable faithful here that programmers shouldn’t be the focus of their fear and ire … Silicon Valley should be.
The panel, “Wall Street Update for Main Street MSOs,” was featured at The Independent Show, the annual confab for small and midsized cable operators hosted by the American Cable Association and the National Cable Television Cooperative.
Indeed, far from carping about increased programming costs, cable operators should feel good about their business. New digital entrants destroyed the newspaper, music and Yellow Pages businesses, but the cable industry has largely avoided the mass migration of subscribers and revenue to new digital entrants.
“This is the only industry to date that has been able to fight the onslaught of digital platforms, and so far no leakage,” said Laura Martin, a managing director at Needham & Co., noting that’s a testament to the collaborative relationship between cable operators and programmers. “If that fractures,” Martin added, “70% of gross revenue will disappear.”
Overall viewing of TV content on more devices in the home is up, Martin said, which should provide more cover on price increases. In round numbers, cable’s $75 billion of subscription revenue, in addition to $75 billion in advertising revenue, is up roughly 20% over the past five years. Moreover, “All those consumers that are whining to you that they can’t possibly pay more money are paying another $3 billion to Netflix and another $1 billion in subscription fees.”
All disruption starts at the low end, where there’s no economics, and in time it moves up into the profit pool, Martin said. Google Fiber is “losing a fortune” trying to get cable to invest in higher speeds. “They want free access to fast speeds so they can innovate and deliver things over your pipes for free … They’re coming after you, and they have big teeth.”
