Cable operators need to raise standalone broadband to $80 to offset cord cutting, analyst says

money
The good news (for operators, but not consumers, that is)? Cable companies can probably get away with it.

With cord cutting predicted to take out another 1 million-plus pay-TV subscribers in the third quarter, and probably set to accelerate beyond that, Jefferies analyst Mike McCormack has crunched some numbers and determined that cable operators are actually going to be OK. 

With each triple-play customer who downgrades their subscription from triple-play to broadband-only, the average cable operator loses an average of $32 a month in EBITDA, McCormack said in a note to investors this morning. 

RELATED: Pay-TV sub losses hit the 1M mark in Q3, analyst predicts

FREE DAILY NEWSLETTER

Like this story? Subscribe to FierceVideo!

The Video industry is an ever-changing world where big ideas come along daily. Cable, Media and Entertainment, Telco, and Tech companies rely on FierceVideo for the latest news, trends, and analysis on video creation and distribution, OTT delivery technologies, content licensing, and advertising strategies. Sign up today to get news and updates delivered to your inbox and read on the go.

“MSOs would need to raise standalone broadband pricing to $80, or more, in order to break even from a contribution perspective,” UBS analyst John Hodulik said.

The good news (for operators, but not consumers, that is)? Cable companies can probably get away with it, the analyst noted. 

“We find that this level of pricing (non-promo) exists in some markets already, though pricing will vary,” Hodulik explained. 

RELATED: Comcast to lead doubling of consumer broadband pricing, analyst says

“Given the reduction in lower margin video subscribers, combined with the increased high-speed data pricing, we find that EBITDA could improve by nearly 3.1%,” he added.

Two weeks ago, New Street Research analyst Jonathan Chaplin predicted that Comcast would lead an overall doubling of cable broadband pricing, with operators able to explore price elasticity through faster gigabit-level connection speeds. 

“Cable appears to be the winner, particularly given broadband dominance and competitive positioning, which should translate into the pricing power needed to mitigate video losses,” Hodulik added. “Under similar assumptions, we find that Charter would see modestly better EBITDA and cash flow accretion than Comcast, though results are fairly similar. We also see Telco benefiting where fiber is deployed in-region.”

Suggested Articles

Video product vendor Synamedia is planning to debut at IBC Show a handful of new tools to help content and service providers take on video piracy.

Key details about Apple TV+, the company’s upcoming video streaming service, are still in frustratingly short supply. But MacRumors has uncovered what could be…

Video measurement and analytics company Comscore will lay off approximately 8% of its workforce as part of a plan to reorganize its technology, product and…