Recession Winner: Cable Operators (CMCSA)
There's also a case to be made that because they control the pipes -- and for now, all the data that flows through them -- cable companies will win out as digital media continues to converge.
For now, people will cut back on DVR features and premium channels, but that won't have a huge impact, the Wall Street Journal reminds us:
Time Warner Cable Inc. warned earlier this month that it was seeing a slowdown in some of its premium video services, prompting a selloff. But investors shouldn't overreact.
Consider these numbers. Comcast (CMCSA), the biggest cable operator by subscribers, reported average monthly revenue per subscriber of $110.71 for the third quarter, 8.8% higher than the year-earlier number. Video accounts for about $64 of the number, up $3.20 from a year earlier, with $35 coming from Internet access and phone combined, up nearly $6.
Only about $4 of per-subscriber monthly revenue at Comcast comes from DVR and HD revenue, estimates Sanford C. Bernstein analyst Craig Moffett, while pay per view contributes less.
See Also:
Cable Cos Winning Broadband War: Beating Telcos 2-to-1 For New Subs
Of course, we're all early adopting tech bloggers who have heard of things like (in order of heard-of-ness)YouTube, Netflix, Hulu and Sling.
If/when the economy is officially really bad -- meaning we still have troubling economic news post Jan. 20 -- families will start officially really making tough budget decisions and cable cos. will take a hit.
Doomsday Cable Revenue
Here's how it will shake down by triple feature, the number in parenthesis is the doomsday monthly revenue if the economy stays officially really bad for officially really long.
Cable Service ($9.95)
Subs will opt for the most basic of cable. If Hulu does their job, the subscribers effected could be much larger. The only saving grace here is that most current cable subscribers have listened to the DTV cable propaganda and will not be ordering converters so if they don't have cable, they won't have TV.
Cable Phone Service ($0)
If Vonage does it right, they can take significant share as subscribers opt for the $24.95 package vs. cable's price point. Or people will abandon it all together and use their mobile phone as their primary phone.
Cable Internet($34.95)
Some families (e-mailers and basic users) will revert back to dial-up, but the Web isn't set up for dial-up anymore so only those that are really strapped and basically only check e-mail, will leave.
When families have to make tough decisions, they'll keep the lights and stove on and the phone working. Broadband Internet access isn't integral enough to everyone's life for it to join that basic needs list, but it's more than likely to stick around than cable phone.
Then, cable companies will have to raise the price on Broadband to make up the gap on other losses.
Results
So even in my unscientific numbers that don't take into account cable quitters, the monthly cable revenue per subscriber would be cut in more than half at $44.90 if the economy stayed bad for long. The cable companies would probably raise all prices like the most basic cable of cable to $19.95, but if a family can save $40 a month, that's groceries or gas that is more important than access to Myspace, especially since there are work computers for that.
Just as magazine are starting to close and save trees left and right, you'll start seeing the girth of cable channels disappear. With people on basic cable, there can't be 10 Nickelodeons and 15 business news channels.
Companies like the aforementioned Vonage and Verizon can had pricing pressures to steal market share, but at the end of the day, it's the chicken ghosts of the historically poorly run and slow-to-innovate cable companies coming home to roost.
Long plays (prioritized by strength):
1. twc (ripe for an acquisition by msft, goog, or aapl)
2. cmcsa (Rogers Family are the ultimate cock blockers)
3. T (iPhone yay! uVerse bad, time to buy an MSO again. Armstrong was early)
4. vz (VZW management clueless! fios expensive)
5. cvc (needs to buddy up, Dolans can't get the dough to take private)
Shorts
1. DTV
2. Dish
3. S/clwr (no one giving them any money in this economy until Hesse get's his ugly mug out of the commercials).
**Satellite guys lose leverage bigtime as the internet connection gains importance.
@everyone else:
You guys keep overlooking the power of Sports content to keep the TV sig guys going. I had an HD antenna and was using netflix along with my laptop hooked up to the TV for content. Worked great but I still couldn't get Red Sox home games or any Celtics games at all.
So I called up the local MSO when they offered an amazing HD/DVR package deal for $77/month (10mbps net + HD/DVR basic digital package). I was already paying $40/month for broadband so this was a good trade in my book.
I threatened to remove the cable TV service after the introductory 3 month deal expired, and they let me keep the same package for $85/month. I was gearing up to build a home media center PC with a TV tuner card for DVR purposes but the cost & maintenance issues would have been way higher, and I still wouldn't get the sports content.
Plus I have to admit that's its just easier using my 160GB moto DVR box. The software isn't perfect, but it's good enough. And I still use netflix and the laptop as a media bridge for net content.
Net conclusion: the DVR will keep the video subs happy for a lot longer than people think. But the broadcasters will come looking for more money as the advertising dollars dry up due to the use of DVR's. I have to admit that I'd easily pay another $20/month for my video service, plus another $50/month for broadband because it's that important to me. So the bit providers win because i really need my bits and there's not enough competitors offering better prices.
I've thought about getting AppleTV, but they need a nflx like pricing strategy. ATV is still too expensive per item.
Would love to hear what other people are doing.
Will FIOS be a threat?
@Steveo I'm a huge sports fan, and get everything everything I need from the web. Whether its ustream or justin.tv or espn360... everything is out there you just have to spend 10 minutes before a game and look. Also NHl.com offers packages online...NFL and MLB to follow suit next year.
Agree with above that recession will push people back to dial up (not any of us) because it is just plain cheaper. The first thing people trim are non necessities and again sorry steveo emailing at 15 megs up is not a necessity it is a nicety.
For example, Comcast owns the Comcast Sports Network which has the exclusive rights for the Boston celtics. Maybe i can find someone streaming a game on the web, but I want to know 100% that i can watch the game in HD without crossing my fingers. Especially if I invtite people over for a game. Same goes for the red sox.
I'm paying $45 a month for the video sig with HD/DVR and I'm fine with that price. My suspicion is that the total price goes up for broadband as more and more people download mountains of content.
My point is that one way or the other, the MSO's will extract their money just as Nick suggested in the main article.
The cable bundles are now being undercut but the telephone companies as we speak. Plus U-Verse and FiOS are a much better product too.
http://www.buffalonews.com/cityregion/story/504193.html
BTW, who is going to pay the production costs of these high quality programs if the networks lose viewers to the free service things like HULU? Anybody?