Wall Street Suddenly Wakes Up To Cord Cutting
from the good-morning-sunshine dept
Most of the cable and broadcast industry’s cord cutting denial is aimed at investors, who — if you’ve yet to realize — may not always have the firmest understanding of the technology they’re investing in. While many investors have been buying the cable industry’s argument that cord cutting either doesn’t exist or is only something done by losers and nobodies, the recent sharp decline in ESPN viewership appears to have finally woken the investment community from its adorable slumber.
As we recently noted, ESPN has lost 7.2 million viewers in the last four years, and a little more than three million in the last year. Since ESPN is annoyingly force-bundled with most basic cable subscriptions a lot of these users are cord cutters. Many more are being lured away by the new realm of “skinny” cable options that may not include ESPN — options ESPN has been suing to stop to “protect innovation.” ESPN is stuck in legacy industry purgatory: offer a standalone streaming service and accelerate cord cutting — or refuse to offer a standalone streaming service — and accelerate cord cutting. Either way, the train has left the station.
When Disney earnings last week indicated ESPN’s fortunes are getting worse, investors in all of the major cable and broadcast companies suddenly became notably nervous as they collectively realized ESPN is no longer the untouchable television juggernaut it wanted everyone to believe it is:
“In the old days ? basically, up until a month ago ? most people in the video world assumed ESPN was untouchable. It commanded the biggest subscriber fees from traditional pay TV providers, and even if you imagined that one day people would start buying TV over the Internet from people like Apple, it seemed as though it would do just fine in that scenario, too.”
And ESPN’s been one of the more solid performers. Children’s programming has been absolutely demolished by services like Netflix. Investors and cable executives have tried to argue that they can make up for cord cutters and ratings drops by endlessly raising subscriber TV rates, though they’d quietly been warned for years that this wasn’t a winning long-term strategy. The ugly truth is that cable and broadcast is going to have to compete on price if it wants to adapt to the internet video revolution, and that’s a message that’s hard to hear when your head is planted squarely in the sand.
Just wait until Wall Street realizes (perhaps in 2018?) that there are tens of millions of young Americans who’ve never signed up for a cable subscription and have no intention of ever doing so.