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Rising demand for broadband services will compensate for the loss in TV video subscribers and help sustain industry growth through 2016, says Moody’s Investors Service. As a result, the rating agency maintains its stable outlook on the US cable industry.
Broadband subscribers outnumbered total video subscribers in Moody’s rated universe for the first time at the end of 2014, and the agency forecasts that this spread will widen to 7 per cent by the end of 2016 as demand for broadband continues to grow.
“This change in subscriber demand represents a fundamental shift in consumer appetite and the economics of the cable business model,” said Jason Cuomo, a Moody’s Vice President and Senior Analyst. “The loss of video subscribers is a fundamental weakness, but broadband demand and pricing actions are more than fully offsetting the negative video trends.”
The industry continues to raise prices for broadband services, driving average revenue per unit higher. Demand is being largely driven by video consumption, which requires more and faster bandwidth, positioning cable companies to further monetise their high-speed distribution system. At the centre of this transformation is streaming content ‘over-the-top’ to deliver video-on-demand services which is growing quickly, according to the report – Pricing, Broadband Demand Ease Pressure from TV Subscriber Losses.
“Despite the concerns that the cable industry is about to lose its competitive footing, it still maintains a steady share of the triple-play bundle — offering a package of video, broadband and phone services,” said Cuomo.
Moody’s notes that industry consolidation resulted in a number of transformative deals over the past year, but further consolidation is unlikely through 2016 given the size and concentration of the largest and smaller players.