Signaling a major shift in priorities for cable customers, Moody's says cable operators will, beginning in 2015, start serving more broadband subscribers than video subscribers.
The findings are part of a new Moody's Investor Service report, "Couch Potatoes Are Switching Screens as High-Speed Cable Subscribers Overtake Video." Moody's estimates that subscribers to cable broadband and video services pulled even at about 50 million apiece at the beginning of 2014.
But driven by greater demand, broadband subs will begin to pull away. In the report, 53 percent of cable subscribers say broadband is a service that would be "very hard or impossible" to give up. Only 35 percent of respondents said the same for video services.
"Cable providers' largely upgraded networks and high-speed capabilities can make them the first call for consumers seeking fast Internet connections," says Moody's VP and senior analyst, Karen Berckmann. "But if cable companies want to sell their video product as well, the onus is on them to provide a compelling video experience at an attractive price."
As Moody's notes, fewer video customers will mean lower programming costs for cable operators, since those licensing fees are paid by subscriber. That will help margins in the short term.
"Video is the lowest-margin product, so, all else being equal, fewer video subscribers mean higher margins," Moody's writes.
However, the eroding video subscriber base has risks for cable operators, who lose economies of scale in terms of technicians and customer service.
For more:
- read this Moody's press release
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