Best of Web: Why media firms will triumph over the cord-cutting threat
CNBC | By John E. Maloney, chairman and CEO of M&R Capital Management | June 1, 2016
Cord-cutting appears to be all the rage with consumers, and that has put pressure on media stocks dependent on cable TV. But maybe it is not such a big threat to media companies, after all.
You can see the appeal of cutting the cord: It’s a real savings to abandon expensive cable packages — which often give 150 channels, many of them of little use to viewers — in favor of streaming services over the internet, where people can cherry-pick their favorites.
Cable TV is getting more expensive all the time. According to Leichtman Research Group, the average cable bill is up 39 percent since 2010, some four times the inflation rate. On-demand platforms such as Netflix and Sling TV charge a fraction of cable’s fees to stream programs.
The cord-cutting trend began in 2013 when, according to Leichtman data, cable providers lost 100,000 subscribers. The departures accelerated to 150,000 in 2014 and 385,000 last year. That looks like an ominous trend, right? Well, in fact, the loss is minuscule: The number of households with cable is 94 million, so cable providers have lost just 0.7 percent.