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Cable Industry Assessment

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Analyzing the current state of the cable industry and exploring how players are combatting decline across a variety of drivers
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Russ Lange


A fervent believer in the promise of human powered growth, Russ leads CMG in partnering with companies to help them become aligned, agile, customer-driven enterprises that unleash the potential of their organizations with sustainable improvements in focus, teams, culture, and process our clients.

About The Author

Mark Chinn


Mark leads CMG in partnering with Telecom companies to help them increase customers and accelerate revenue. His 25+ years of experience in growth, strategy and execution includes B2C and B2B multi-channel acquisition programs, customer experiences that surprise and delight, pricing that optimizes customer value, and innovative product development.

Cable revenue growth rates are declining, driven by softness in the residential market. Since 2006, industry revenue growth is slowing, driven by a net loss of residential video and voice customers. Cable video services face the dual challenges of displacement by streaming services and fast-growing programming costs, while cable voice continues to be displaced by mobile service at an increasing rate. These trends are irreversible. Residential internet and business services growth, while robust, are slowing as well. The overall picture is one of an industry in search of new growth drivers.

Segment Momentum:

Business services outperformed residential, but both business and residential experienced declines during the period. Within the residential segment, it’s no secret that video and voice have racked up customer losses, offset by enduring internet strength. As the table and chart below illustrate, internet growth is driven by a combination of customer increases and positive pricing momentum. However, even internet is not able to maintain the robust growth rates of ten years ago. As further evidence of slowing internet revenues, Comcast reported a net loss of internet subscribers for the first time in its history in Q4 2022.

Internet performance will be interesting in the years ahead:

  • Cable companies will be facing competition from new faces, like T-Mobile and Verizon wireless home internet, and old foes, as the telcos overbuild their DSL footprints with fiber
  • Fiber start-ups and Wireless Internet Service Providers (WISPs) are entering the market, many to compete for the $65B federal infrastructure funds earmarked for broadband deployments
  • Internet will remain indispensable to consumers and businesses and drive pricing increases due to bandwidth demand, but more companies will be chasing fewer customers in the years ahead

Of course, not all cable companies are created equal, and individual companies perform better or worse than the industry average. To cite a positive example, Comcast, the largest cable company, has outperformed the industry as a whole. Comcast’s residential revenue trend follows the overall industry directionally downward, but the company has outpaced the industry in each of the residential products.

Video and Voice:

While Comcast directionally mirrors residential revenue industry trends, on video, Comcast performance is distinct from the industry as a whole. In addition, Comcast’s video rate (i.e., the price paid per video customer) has offset subscriber video losses to maintain nearly flat revenue for a five-year period. Comparing this to all other cable companies, the combination of subscriber churn and flat rates resulted in $6B in annual video revenue loss. The linear video distribution business is a cash cow for all cable operators and the best providers can hope to manage down the business gradually and backfill the revenue over time.

As traditional TV changes, many cable providers have embraced over-the-top (OTT) streaming services as a driver of internet bandwidth demand. Many large cable companies display streaming services, such as Netflix, from their set-top boxes. Gigabit speed, internet-only plans have become a critical and growing customer acquisition tool, and the larger operators are going further.

At Comcast, which also owns NBC Universal, the company views its Peacock streaming service as key to its video content strategy. Peacock has grown subscribers and revenue at significant rates, however, the high investment in fixed-cost programming left Peacock with significant EBITDA losses in each of the last two years. There is belief that these figures have topped out as they aim to reduce the annual deficit and the company reinforced its belief in Peacock’s potential as a long-term programming growth driver for NBC Universal.

On voice, Comcast has again performed better than the industry:

  • Industry voice revenue declined 30% from 2016 – 2021, compared to just 17% revenue loss for Comcast
  • Mitigating voice losses has enabled internet growth to fuel stronger overall revenue performance
  • The question becomes whether Comcast can continue to manage a more gradual loss of video and voice revenue, or whether a steep cliff is on the horizon

Internet and Commercial:

In addition to internet performance, other cable categories create significant revenue tailwinds for Comcast and the entire industry. Business services benefit from both subscriber growth and increased Average Revenue Per User (ARPU).

In addition to business services, mobile services are adding new revenues for the largest cable companies. Starting with Comcast’s Xfinity Mobile in 2017, the major cable companies, Charter (Spectrum Mobile), Altice, and Cox, have all launched service in the past 5 years utilizing Mobile Virtual Network Operators (MVNO), meaning they have commercial agreements to purchase capacity from mobile operators like Verizon.

Primarily, cable’s wireless business models are augmenting the value of internet (i.e., home internet required for a mobile subscription) and typically provide discounts to multi-play customers. Mobile represents a potential high-growth category for cable companies, but the category, as currently defined, is mature and saturated, with limited net subscriber growth. This means the majority of cable’s gains are at other operators’ loss (i.e., displacement or switching). Category maturity will limit cable’s upside once the low hanging fruit is consumed, but it still exists with Xfinity Mobile penetration at only 9% of high speed internet households at the end of 2022. Adding Comcast mobile to its core residential revenue provides an accelerant to growth, as shown in the chart below.

Impact on the Income Statement:

A downside of the MVNO model is the variable cost economics, where the purchase of wireless capacity (i.e., minutes and data) represents a cost that will not scale with growth, or, cannot scale to “owned” infrastructure economics. The opportunity for cable companies is to create an optimized mobile business model, offloading data to their own networks in densely populated urban and suburban areas, and leveraging the MVNO variable rate model in rural areas. In doing so, cable can compete with the cost structure of wireless operators, assuming cable’s MVNO rates do not increase significantly with loss of volume.  

How has slowing revenue growth impacted profitability?

Comcast has grown profit at a faster rate than revenue, where the incremental EBITDA margin between 2016-2021 was 58.8%, meaning nearly $0.60 of each new dollar in revenue fell to the EBITDA line

While Comcast’s recent EBITDA performance is exceptional, it consists of two parts:

1) Broadband growth drives higher margins, as broadband is the highest operating margin product at 90% – 95%, followed by voice (~ 80%) and video (35%)

2) Comcast has scaled and optimized its operating costs extremely well in the past five years

The question is to what extent this cost management and optimization can continue? Typically, a company will see cost reduction opportunities diminish quickly, whether achieved through operational efficiency (e.g., automation), staff reductions, or reorganizations. If Comcast has realized most of its available cost optimizations, EBITDA will grow more slowly in the coming years unless new revenue growth drivers materialize.

Where To Next?

The years of double-digit cable growth appear to be behind us. Part of the reason is size, the segment’s growth creates a hurdle to growth rate due to the law of large numbers. But part of the reason is also fundamentals, the entire categories of traditional video and landline voice are dying, and this revenue must be backfilled before we can discuss growth.

For 25 years, CMG has helped cable and telecom businesses develop strategic assessments, identify best fit options, and plan and execute new product launches. As part of our Cable Revenue Growth series, we will breakdown each of the industry’s most promising revenue backfill and growth opportunities across three primary buckets: Network Expansion and Upgrades, Residential, and Commercial.