Written by Matt Balvanz
If you’ve been paying attention to the news surrounding the future of cable TV, you’ve probably already concluded that the industry’s days are numbered. With all of the programming options available online for monthly fees well below cable TV packages, why would anyone not cut the cord at this point? Industry experts believe the only valuable aspect of the cable TV bundle is the access to live sports. But, according to a 10K filing from Disney in November of 2015, ESPN’s subscriber base has dropped from 99 million in 2006 to 92 million, a loss of 7 million subscribers. So, it appears live sports isn’t even immune to the cord-cutting phenomenon.
Are sports fans really deciding that traditional cable TV packages are so expensive that they aren’t tuning in to live sports anymore? Should sports content providers be worried that their games aren’t as valuable as they used to be? Should cable distributors be worried that their coveted bundle packages are priced too high? Or, is there another force working behind the scenes that is driving this behavior? I believe one major driver that nobody is talking about is password sharing.
According to a consumer survey of 10,000 US broadband households conducted in Q3 2014, 6% of respondents claimed to use a password from a friend or relative to access non-cable programming, which equates to about 6 million subscribers. Keep in mind that this 6% is just the people who were willing to admit to borderline illegal activity in a survey, so the results are likely conservative.
So, we’ve got 7 million people who cut the cord, and 6 million people (conservatively) that are using other people’s passwords to access cable TV. It seems to me that people are still very interested in watching sports and other quality programming, but they would just rather not pay for it. The obvious question here is why are cable companies and other over-the-top networks like Netflix and HBO allowing all of this password sharing. Executives claim that they are fine with the password sharing for now, since it gives potential customers a way to access their content, and the current environment is all about gaining subscribers, so it’s best not to risk the negative PR. But, at what point do the subscriber losses reach a level where these companies start to crack down on password sharing? And when they do, will people really stop viewing cable programming for good, or look for ways to pay for the content again?
Nobody can predict the future, but my best guess is that when the 6 million+ people who are paying $0 per month for cable are no longer allowed that pricing luxury, they will look at the options available, and re-subscribe to cable TV. Of course, the viewer experience of cable TV will look a lot different, as there likely won’t be cable boxes or actual cable cords running through living rooms, and consumers will be watching on TVs, phones and tablets. But ultimately, I think sports fans who have been cord-cutters will come running back once they can’t use a friend’s or family member’s password.
I know this goes against nearly everything else you will read. Right now the conventional wisdom is to forecast a doomsday scenario for cable TV in the age of cord-cutters and cord-nevers. But most of the rumors surrounding over-the-top options (Apple TV, YouTube, and Amazon most prominently) claim that they are trying to piece together subscription packages with around 12 channels costing consumers $40 per month. Compare this to current cable TV packages offered by Time Warner Cable and Comcast that offer 70+ channels for the same monthly cost, and if someone is forced back into making a purchase decision, why would they pay the same amount for fewer channels? Unless over-the-top options can offer equal or more content at a value that’s the same or better, I think cable TV will see some degree of resurgence once password sharing becomes more difficult.
The only question then will be what we will call the cord-cutters that re-subscribe to cable. Cord-menders? Cord-fasteners? At Navigate, we plan to call them “Cord-comebacks” if and when this day comes.