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Cord-Cuttings Dark Future

Cord-Cuttings Dark Future

Cord-Cutting's Dark Future

August 25, 2020

The COVID-19 pandemic has revealed some deep fissures in the US economy and politics. But it's also shown just how much people rely on cheap streaming entertainment, especially when they're stuck at home. And with a lack of sports, cord-cutting has accelerated to the point where it's now clear that live TV streaming services are likely under threat of going the way of cable unless both consumers and cord-cutting providers find a way to fight back.

Streamer's Spotlight: The Death of Cable Means Higher Prices for Cord-Cutters

In economics, price competition exists when two products sit on the market with a similar design. In most cases, consumers will judge these two products, see that they are similar, and opt instead for the cheapest option. For a long time, most traditional cable TV services had little to no price competition, so their prices continued to rise steadily.

Since 2015, however, vMVPDs, or "Virtual Multichannel Video Programming Distributors", have presented a growing threat to traditional cable TV providers. Subscribers see value in them, and these cord-cutting services, like Hulu + Live TV, Sling TV, and fuboTV, offer many of the same channels at a lower price.

Now enter a global pandemic, with people losing jobs and forced to stay at home. Entertainment is a hot demand, but many people who still were latched onto traditional cable are looking at those $100+ per month bills began eyeing them with a new disgust.

As such, people are cutting the cord faster than ever. And a recent Roku study found

less than 1 in 5 people

who cut the cord plan to return to traditional cable TV, even when sports return in full.

Less Competition, Higher Prices

People cutting the cord is certainly a good thing. It means streamers have gotten the cost-saving bug, and they like it. But the consequence to that is exactly what gave rise to cord-cutting in the first place: lack of competition.

Content providers have been forcing cord-cutting services to slowly edge up their prices by demanding more money to license channels. As more people traditional cable TV, networks are seeing the dollar signs in streaming. The result here is two-fold:

1. Higher prices from the vMVPDs currently on the market, which we've already seen happening.2. Fewer vMVPDs entering the market, because the cost of entry has grown too high due to large licensing fees and entrenched competitors.

We're probably less than a decade away from cord-cutting services inching in on traditional cable TV prices unless something in this process gives way. At present, there's very little consumers can do, other than vote with their dollars. Streaming service providers may need to fight these price increases more stringently and some (like Sling TV and Philo) are certainly are holding the line. But many (like Google and its YouTube TV service) will probably fall squarely on the side of increased profits.

Fast forward to 2030. it'll be interesting to see what the landscape looks like. But if the current trend continues, it might not be great.