U.S. Cable Channels Forecast: Dark Clouds With Silver Linings. Takeaways

Industry analyst SNL Kagan forecasts a big decline in U.S. multichannel video subscriber homes:

SVOD Expands:

According to SNL Kagan the online video subscriber base will expand to 94.6 million homes from around 80 million today.
The SVOD category is led by Netflix and Amazon, followed by Hulu.
These are supplemented by an expanding buffet of niche services, including documentary specialists like CuriosityStream.
Many consumers subscribe to multiple SVOD services, as well as to a multichannel package from their cable operator.

Revenue Implications

Most channels will lose revenues as their subscriber counts fall, though these losses are partially offset by annual increases in long-term distribution contracts.
Because their reach is contracting, channels will also lose ad revenues even if their ratings are steady.

Silver Lining?

Media buyers and brands are pushing back against the Wild West of online advertising.
Analysts see a return to broadcast and cable networks that offer larger scale than mobile and online video, and that are also properly verified and increasingly addressable.
Read “Will Data Resurrect TV?” by leading analyst Ed DeNicola.

TAKEAWAYS

Downhill is not Sunset

Cable isn’t falling off a cliff like the CD or newspaper businesses in recent decades.
The cable operators enjoy a ‘Triple Play’ business model that packages their costly video product with highly profitable Internet and Telephone services.
Operators will need lots of channels for the foreseeable future. And channels always need new programs.
Combined, the channels will continue to spend billions on nonfiction programming.
They will regularly refresh their lists of go-to producers.

Scale Will Still Matter:

The U.S. will remain the #2 largest cable market worldwide after China.
Its 77 million subscribers are desirable, wealthy consumers by global standards.

Regular Haircuts

Declining advertising and subscriber revenues will force most networks to trim programming expenses.
Channels will be driven to find economies in headcount and in the production budgets of their suppliers.
There will be more defensive consolidations like the recent Discovery / Scripps deal.

Skinny Bundles

Many of 2027’s projected 77.4 million multichannel subscribers will have adopted “skinny bundles” that offer them their most preferred channels, dropping the marginal ones.
The skinny bundle trend will force many marginal channels to go online or close.

SVOD Shrinks The Ecosystem

SVOD won’t replace these rolling cutbacks in the channels’ program pipelines and expenditures.
The SVOD model features a handful of promotable documentaries and factual series that are supplemented by acquisitions of completed programs.

Back to the ‘Eighties + ‘Nineties

Many channels are turning from Reality-based schedules by commissioning the classic factual programs that built their brands in the first place.
- The recent headline “A&E Resurrects ‘Biography’ Franchise” captures the trend.
To contain costs, U.S. programmers are taking a 2nd look at co-productions and acquisitions.
This is potentially good news for the well-funded European public broadcasters, their producers and distributors.
The shrinking U.S. cable/satellite audience also gives a good look for PBS, which is fully distributed, and earns audiences that may be older, but whose scale is the envy of most factual cable channels.

“All Tentpole / No Tent.”

Program execs are beginning to pay more attention to the artisans who create affordable programs that attract viewers and then deliver them from one hour to the next.
My next post covers the shifting balance betwen auteurs and artisans.

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