Declining profit margins from streaming video services are causing some small- to medium-sized cable operators to slim down their video offerings. In some cases, they are eliminating video altogether as they make the transition to pure-play Internet providers.
Forcing this decision for these companies are factors such as rising network costs and increasing consumer demand for over-the-top streaming services.
As explained in a recent International Business Times article, carrier negotiations with several major network providers like NBC, Turner Broadcasting, AMC and Discovery have resulted in steep annual price increases for small operators. Large networks are relying less on advertising revenue and more on operator fees to profit. As a result, it’s becoming more expensive for operators to resell content.
What’s more, as Wave Broadband CEO Steve Weed explained, as telecommunications companies continue to offer innovative over-the-top services, they diminish the value of the content offered by small operators.
“They’ll all have over-the-top products available at a lower cost than us anyway, so why spend on that?” Weed said. “We just won’t bother doing it.”
As for the cord-cutting problem, cable providers as a whole lost about 600,000 customers in just three months alone in 2016 compared to 500,000 in all of 2015.
Don’t expect to see a sharp increase in small cable operators fleeing video overnight. The majority will continue to experiment with slimmed down “skinny bundle” content packages, which offer fewer channels in custom packages.
The days of traditional “fat bundle” video packages, however, may soon be coming to an end. Only time and market conditions will dictate how this trend will play out over the next several years.