Early this year I pointed out the usage of television antennas was on the rise, posing a threat to cable names like Comcast (NASDAQ:CMCSA) and Charter (NASDAQ:CHTR) already fighting a strong cord-cutting movement. Although old-fashioned airwave broadcasts may not deliver a death blow to the linear cable business, they could certainly exacerbate the headaches on-demand alternatives like Netflix (NASDAQ:NFLX) and Walt Disney's (NYSE:DIS) Hulu are causing.
TV antennas may be doing more damage than I initially suggested, however, according to a recent survey performed by technology market research firm Parks Associates. Its poll, taken during the third quarter of last year, determined that among U.S. homes with a broadband internet connection -- homes capable of plugging into several free and low-cost streaming video venues -- 25% of them also used an aerial broadcast TV antenna. That's up from only 15% a year earlier.
Now, don't rush to an extreme assumption. Nearly 80% of these consumers still watch cable television and around 60% of these broadband subscribers stream video from a service like Hulu or Netflix; owning an antenna doesn't necessarily preclude the use of a second or third choice.
On the other hand, the antenna trend is telling -- and troubling -- for cable TV service providers when coupled with another nuance of the poll.
Aerial broadcasts are high-tech, and highly supported
Aerial broadcast television has come a long way in just the past few years. The new ATSC (Advanced Television Systems Committee) 3.0 standards -- the new norm in the United States -- call for 4K ultra high definition broadcasts as well as audio quality one would only expect from an internet-based feed. The 3.0 standard also includes provisions for 8K video, whenever the world is ready for that big leap.
It's not just the underlying technology that's experienced big-time improvements, either. Perhaps seeing the slow meltdown of the traditional cable TV industry, media and television tech giants are increasingly supporting free, localized broadcasts. Sony (NYSE:SNE) owns over-the-air channel GetTV, which reaches roughly 80% of U.S. consumers, and has committed some of its best movie content to the platform, including franchises like Spider-Man and Men in Black.
Dish Network's (NASDAQ:DISH) streaming service SlingTV readily supports the usage of over-the-air (OTA) AirTV devices for its streaming video subscribers, arguably as a way to remain part of consumers' TV-viewing ecosystem. Importantly, the AirTV Player now supports the recording and playback of aerial TV broadcasts.
TV antennas becoming normalized again
Sony and SlingTV's moves mirror what Parks Associates' data says: The old-fashioned antenna is making a comeback, ultimately rooted in the one thing streaming companies struggle to do. That is, offering consumers news that's geographically pertinent to them.
"Local news matters to most households -- local broadcast channels are the most preferred channel types, and news is the most preferred broadcast content," said Parks Associates Director of Research Steve Nason. He believes COVID-19-related lockdowns have driven even greater antenna usage since the third quarter of last year before the outbreak took shape.
The eventual end of the pandemic may not necessarily lead those consumers back to their pre-outbreak viewing habits, either, given one data nugget that emerged from the poll. As it turns out, although only about one-fourth of broadband households actively use a TV antenna, those that do tend to watch more television than the average broadband household does. If teaching new users how to navigate over-the-air choices and getting them comfortable with this sort of programming is the big hurdle, the coronavirus pandemic may leave aerial broadcasters much better positioned than they were just three months ago.
Another finding from the survey that should concern cable companies like Charter and Comcast: While roughly half of antenna owners are still customers of some sort of paid video service, the other half of the antenna-using 25% of broadband households -- around 12% of the total surveyed -- don't subscribe to any sort of pay-TV service at all. This includes live television streaming options like SlingTV or Hulu Live, both of which could easily make use of the high-speed connection they're already paying for.
Granted, it's still not a terribly large portion of the consumer market. Deloitte reckons the United States will end 2020 with 41 million regular users of broadcast antennas, compared to a national population of around 330 million. Deloitte's estimate of only 84 million pay-TV subscribers will mark a sixth straight year of decline, however, from more than 100 million cable subscribers as of 2014. The opposing trends underscore the problem linear cable providers face.
Connecting the dots
To their credit, cable giants Charter and Comcast seem to see the writing on the wall -- the latter perhaps more so than the former. As fellow Fool Adam Levy pointed out earlier in the year, for better or worse, Comcast has lost interest in chasing unprofitable cable television subscribers. Broadband is the breadwinner most cable companies now want to focus on, simply because that's a customer relationship with lots of options for the provider, including selling that provider's own streaming service to its high-speed internet consumers. Aerial television broadcasts completely sidestep the need for an internet connection, though, leaving the likes of Charter and Comcast altogether out of the loop.
Now we know those aerial television broadcasts are quickly gaining ground. Whatever the cable industry is doing to stave off the impact of cord-cutting, it might want to do more of it, and faster.