2020 was a tipping point for growth in connected TV on-demand video streaming services, as millions of cooped-up consumers waited out the pandemic at home. Streaming service providers added tens of millions of new customers last year, which drove an acceleration in cable TV cord cutting.
Despite the surge in cord cutting, some cable operators have been able to expand their margins with a broadband-first strategy. Several indicators suggest the connected TV phenomenon could accelerate even further in 2021, which should help improve margins for cable operators who embrace this trend, according to a report from rural America cooperative bank CoBank’s Knowledge Exchange.
“On the surface, cord cutting seems like a major headwind for cable operators, as conventional wisdom suggests that when a service bundle begins to fracture, voluntary churn increases,” notes Jeff Johnston, lead communications economist with CoBank. “But in reality, this was not necessarily the case, particularly for operators that saw this trend coming and successfully implemented a broadband-first strategy.”
The transformational video industry trends in 2020, largely driven by Covid-19, represent opportunities for broadband providers. Video margins are thin at best for small rural operators, which means they should embrace a broadband-first model. Broadband margins are healthy, and consumers need a reliable high-speed data connection to watch streaming video. Many operators have been able to successfully thread the needle between cord cutting and growing margins.
According to CoBank, one of the most forward-thinking broadband providers, Cable One, provides a case study for how to successfully pivot to a connected TV world. Smaller rural operators should pay close attention to how Cable One deemphasised its video service and adopted a broadband-first strategy. By doing so, it was able to leverage the strength of its network and retain a high percentage of broadband customers.
Predictably, Cable One’s residential video revenues have been in decline, but its residential broadband revenues have increased 17 per cent per year since 2015.
Numerous signs point to an increase in connected TV adoption over the next several years, which should help broadband operators improve their margins. The report from CoBank’s Knowledge Exchange provides insights on what media and broadband companies can expect in 2021 and strategies broadband operators are employing to better align their business with streaming video.