Broadband Operators Can Capitalize on the Explosive Growth of Streaming TV
Margins expand with a broadband-first strategy, despite the surge in cable cord cutting
DENVER (March 18, 2021) — 2020 was a tipping point for growth in connected TV on-demand video streaming services, as millions of cooped-up consumers waited out the pandemic at home. Streaming service providers added tens of millions of new customers last year, which drove an acceleration in cable TV cord cutting.
Despite the surge in cord cutting, some cable operators have been able to expand their margins with a broadband-first strategy. Several indicators suggest the connected TV phenomenon could accelerate even further in 2021, which should help improve margins for cable operators who embrace this trend, according to a new report from CoBank’s Knowledge Exchange.
“On the surface, cord cutting seems like a major headwind for cable operators, as conventional wisdom suggests that when a service bundle begins to fracture, voluntary churn increases,” said Jeff Johnston, lead communications economist with CoBank. “But in reality, this was not necessarily the case, particularly for operators that saw this trend coming and successfully implemented a broadband-first strategy.”
Last year was transformational for the video industry, due in large part to COVID-19. According to The Trade Desk, a digital advertising technology company, by the end of 2020 more people were watching TV via streaming video services than the traditional linear approach.
Major media companies have started to prioritize their streaming services. Warner Bros. is now simultaneously releasing movies in theaters and on its streaming service HBO Max, and Disney has reorganized its business around producing and distributing streaming content.
Disney Plus has amassed over 100 million subscribers since its launch in November 2019 and expects that number to grow to 230 million-260 million by 2024. Apple TV Plus also saw tremendous growth as did AT&T’s HBO Max and Comcast’s Peacock service.
On the broadband side, Comcast announced that it experienced two years’ worth of network traffic growth in just four months. And despite the increase in video conferencing applications like Zoom, video streaming drove the lion’s share of the increase in traffic.
These trends represent opportunities for broadband providers. Video margins are thin at best for small rural operators, which means they should embrace a broadband-first model. Broadband margins are healthy, and consumers need a reliable high-speed data connection to watch streaming video. Many operators have been able to successfully thread the needle between cord cutting and growing margins.
One of the most forward-thinking broadband providers, Cable One, provides a case study for how to successfully pivot to a connected TV world. Smaller rural operators should pay close attention to how Cable One deemphasized its video service and adopted a broadband-first strategy. By doing so, it was able to leverage the strength of its network and retain a high percentage of broadband customers.
Predictably, Cable One’s residential video revenues have been in decline, but its residential broadband revenues have increased 17% per year since 2015.
Numerous signs point to an increase in connected TV adoption over the next several years, which should help broadband operators improve their margins. The report from CoBank’s Knowledge Exchange provides insights on what media and broadband companies can expect in 2021 and strategies broadband operators are employing to better align their business with streaming video.
Watch a video synopsis and read the report, Broadband Operators Well Positioned to Capitalize on Accelerated Connected TV Growth.
CoBank is a $159 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 75,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.