Perhaps one of the most important reasons for local broadcasters and cable system operators to support one another’s business models is their mutual need to remain competitive with the growing number of OTT alternatives for video programming. The best hope for two local media businesses with 20th century roots to remain relevant in the coming decades could ultimately depend upon how well they help one another to survive and grow.
If you think cable companies already have too much power, just wait. Over the next five years or so the industry “will consolidate to around 3-4 dominant cable operators, which will have sizeable footprints,” Moody’s Investors Service SVP Neil Begley says in a report today. The big guys will start to snap up smaller operators, and swap systems, because it will help them compete with phone companies to attract business customers.
Netflix Chief Executive Reed Hastings has quietly met with some of the largest U.S. cable companies in recent weeks to discuss adding the online movie streaming service to their cable offerings, according to sources familiar with matter. In what would ratchet up its competition with HBO, the talks could lead to Netflix becoming available as another on-demand option for cable subscribers through their set-top boxes.
Although cable system operators have combated new technologies and services over the last several years, they have continued to grow higher per-subscriber revenue and steady cash flow. Over the last four years, revenues at seven multiple system operators have risen at an annual rate of 7.3% to $70.95 billion from $53.57 billion in 2006, says media researcher SNL Kagan.