The Transition From the Cable Bundle to Streaming is Messy, and Full of Opportunity

Changing Consumer Behavior

Most of the pandemic driven impacts on consumer behavior have dissipated.  We are no longer running out of toilet paper, flour or puppies. Conversely, some other new consumer behaviors show no sign they will revert to the old way.  Home delivery of any meal is the new normal, and livestreaming video has jumped to another level all together.  

This year, 163 million people in the US will watch live video streamed on the internet, an increase of 29% when compared to 126 million people in the pre-pandemic year 2019 (eMarketer).  

Driving this change in the US is sports.  In China, it is mostly driven by live streaming shopping.  Even if the TikTok of online shopping doesn’t make it across the Pacific Ocean, the paid video live streaming industry is projected to grow at 15% per year through 2027 (Grand View Research).  

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Millions of Users Have Transitioned to Streaming

The pace at which online paid sports programming is growing cannot be understood without considering the end of the cable bundle.  Ten years, 100 million households received 100% of their video content from one source, their cable TV provider. Now that video can be streamed on any device at any time, only 60 million households have cable TV at all and subscriber count is projected to fall below 50 million in the next few years. (Insider Intelligence).

ESPN was the glue that held the cable bundle together.  The cable TV companies still pay ESPN $7 per month for every subscriber.  But half of the money in the cable TV economy has left and is now in the wild looking for content “Over the Top” (OTT).  

ESPN was getting $7 per household, 100 million households for $8.4 billion in revenue per year and now half of that, $4.2 billion, has gone away.  More accurately, $4.2 billion is not getting paid to ESPN and it is finding its way to other paid streaming services.  This re-routing of paid sports spending is what is driving live streaming video to grow 5 times faster than the overall US economy.

The cable bundle death spasm showed up in the headlines this month when Bloomberg reported that ESPN’s owner, Disney, and Charter Communications, the second largest cable tv provider in the US, are in a dispute.  Charter stopped paying Disney for ESPN for every subscriber, so Disney cut off Charter customers – during the US Open Tennis tournament.

In addition to being a dramatic story, this event will only serve to accelerate the rush of cable TV customers for the exits and open more opportunities for live streaming of video over the internet.