On the Shoulders of (Cable + Mobile) Giants

In an “inflection point [that] has been years in the making”, eMarketer published a report this week detailing how in 2024, traditional TV accounted for less than half of US total video subscription revenues for the first time ever. I mean, cord cutting has been a thing for some time so it was only a matter of time. So it’s no surprise that streaming’s steady ascension has let to traditional cable revenue has deteriorated to just 48.2% of total US Video Subscriptions last year on its way to eMArketer’s forecast 36% in 2027 (as streaming soars to nearly 50% and cable-replacement/skinny bundles (vMPVDs) like YouTubeTV, SlingTV and Hulu Live see incremental gains to about 15%.?

It’s against this backdrop that both Comcast and Charter announced their quarterly earnings this week as speculation about a potential, maybe, possible merger of the two biggest cable and internet service providers. Putting aside the quarter-to-quarter sub fluctuations of each, one thing really stood out to me within Charter’s Q4 write up: the company saw 50% Decrease in total video customers declines QoQ as “Spectrum TV Select video customers will soon receive up to approximately $80 per month of programmers' streaming application retail value at no extra cost, including the ad-supported versions of Max, Disney+, Peacock, Paramount+, ESPN+, AMC+, Discovery+, BET+, ViX, and Tennis Channel Plus.”?

Simply put, Charter (along with Verizon and others) are subsidizing what is likely a significant amount of streaming subscriber and revenue growth in order to keep broadband and cable customers.

On the one hand, this all seems symbiotic. Streamers scale their ad tiers (where they can generate incremental revenue), enjoy low subscriber costs, and likely diminished churn given that these are year-long promotions. Cable companies retain the biggest revenue relationship with the consumer and hope the cable, vMVP, streaming, internet, mobile bundle is enough.?

But I can’t help but question our streaming benchmarks and how this quiet but significant driver distorts the very way we assess the streaming sector (at least in the short term). More importantly, is the subscription base of the above streamers built on a house of cards? What happens when Charter or Verizon no longer want to subsidize streamers?

As always stay tuned.