Tuesday, August 16, 2016

Will U.S. Cable TV Industry Also Need to Replace 1/2 Current Revenue Over Next 10 Years?

The most-recent SNL Kagan analysis of cable TV industry revenues predicts cable TV revenues will decline by $2.7 billion over a decade.

But SNL Kagan also predicts the cable industry will also generate $11 billion in new residential broadband revenues.

There is room to question the SNL Kagan optimism on linear video. The product could decline much faster than that. But the substitution of new Internet access revenues for former video revenues illustrates an important point about service provider revenues.

It is becoming something of a rule that leading service providers must replace about half their revenue every decade or so. Assume SNL Kagan is about half right. That could mean video losses of perhaps $5.7 billion, and Internet access gains of about $5.5 billion.

That would be almost a one-for-one revenue substitution.

Total residential video revenue for Comcast, Charter Communications and other American cable operators is projected to fall from $57.7 billion in 2016 to $55.0 billion annually in 2026, declining at a compound annual growth rate of 0.5 percent over the next 10 years, according to SNL Kagan.

Some observers think that is far too modest a projection, as second quarter losses in 2016 would suggest a decline as high as three percent on an annual basis. Granted, the second quarter is the toughest reporting period of the year. Still, the point is that SNL Kagan arguably is being much too optimistic about linear video losses.

Basic video subscriptions are projected to drop from about 53 million today to 45.4 million by 2026.

Internet access subscribers, on the other hand, could grow as much as 13 percent, SNL Kagan estimates.

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