For years, as consumers continue to cut the cord in favor of streaming alternatives, the parlor debate among media observers has been whether or not there is a “floor” to the amount of homes subscribing to a pay TV bundle.
About a decade ago, over 100 million homes subscribed to a traditional cable or satellite service. Now, that number is somewhere in the 60 million range, with no signs that the decline is slowing down.
Top media analyst Michael Nathanson of the firm MoffetNathanson has previously contended that the cable bundle will see a floor of around 50-60 million homes. When prompted by Puck’s sports media reporter John Ourand on a recent episode of The Varsity podcast whether he thought those figures still held true, Nathanson responded yes, but with an asterisk.
“The 50-60 million floor is what we still forecast,” Nathanson said. “But we want an asterisk…I want to hedge my answer of 50 million because, again, you asked about Fox and you asked about Disney. I’m assuming that those companies remain rational and they basically don’t rip out the bulk of their exclusive content and put them into streaming apps, right?”
Nathanson is alluding to the divergent strategies that Fox and Disney have taken as compared to their peers at Paramount and Comcast. For the most part, Fox and Disney have kept their premium live sports offerings (such as the NFL, college football, NBA, etc.) off of streaming services. Conversely, Paramount and Comcast have opted to put premium sports offerings onto their streaming apps Paramount+ and Peacock, allowing that content to be accessed at a price that vastly undercuts the value of the bundle.
“Look, the rate of decline is actually accelerating,” Nathanson continued. “It’s almost counterintuitive. As more people cut the cord, the rate of cord-cutting is picking up. And you say, ‘Wait how is that possible? The people who are left would probably be the stickiest customers.’ But the choices outside the bundle are just getting better, and companies are creating more value for consumers to consider cutting the cord.
“So I will give you a 50-60 million floor, and I want to hedge that John, because I worry that people are gonna start getting more worried when you start getting to that 50 million range, and they start basically blowing themselves up by putting more content over-the-top and just creating more of a hellscape.”
From one perspective, panic in the industry has led to the acceleration of decline. Should companies have decided to keep most of their live sports inventory exclusively within the bundle, there would be few options for sports fans other than to stay subscribed to cable or satellite. On the other hand, media companies have long realized streaming is the future, and putting their best content onto their own streaming apps serves as a leg-up to the competition. Peacock, in particular, has seen success from its live sports strategy.
Nathanson would contend that this strategy has directly led to the accelerated decline we see today. “The world doesn’t have to be that bleak if people are just logical about how they deploy their rights,” Nathanson told Ourand. “It’s just so sad to see what was a great business in decline.
“The reality is, it didn’t have to be this way. The past four or five years, they’ve accelerated their own demise by undercutting their linear price points. And they’re leaking more and more content over-the-top. At the same time, Netflix has only gotten stronger. YouTube as a product has only gotten better…and Amazon with the NFL and now NBA, the number of options outside the bundle have just accelerated, right?
“So it feels to me, it’d be foolish to think that 50 million is the floor given the speed of change and collapse. But I still think there’s a cohort of people who find satisfaction inside the linear bundle. That’s what I’m sticking to. We thought it was 50 million, maybe it will be 35-40 million. There’s a value to a bundle that we have today that should be maintained in a skinnier, cheaper form.”
Even with the number of people cutting the cord, there’s certainly a large market for the traditional bundle. For sports fans, it’s still the best way to get as many sports as possible all in one place. The unfortunate reality, however, is that even a cable subscription is not nearly enough to keep up with all live sports like it once was. Now, fans need to purchase a number of streaming services on top of the bundle to get everything they want.
No doubt, this fragmentation is a source of frustration among fans, and may also be part of the reason people are cutting the cord.
But there’s absolutely truth to what Nathanson says about a skinnier bundle, like that of the stalled Venu Sports venture. Fans want all their live sports, all in one place, without any of the bloat that comes with the traditional bundle. That sort of service could slow pay TV’s decline, or perhaps even reverse it.
For now, media companies will continue the delicate dance of maintaining the still widely-profitable bundle, while preparing for a digital future. Whether the bundle has a floor of 50 million, 30 million, or 0 million is yet to be seen. But that number will certainly be impacted by how media companies choose to distribute their most prized inventory these next few years.
About Drew Lerner
Drew Lerner is a staff writer for Awful Announcing and an aspiring cable subscriber. He previously covered sports media for Sports Media Watch. Future beat writer for the Oasis reunion tour.