Please ensure Javascript is enabled for purposes of website accessibility

Bad News for Comcast, Good News for YouTube: Skinny Bundles Increasingly an Alternative to Cable

By James Brumley – Jun 17, 2020 at 9:19AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The injection of live broadcast content into streaming video packages has given linear cable subscribers a viable choice.

In its infancy, streaming video service from names like Netflix (NFLX -4.49%) wasn't a replacement for cable television as much as it was an add-on. The Netflix content library was respectable but modest, and there was no live broadcast feed.

As time has marched on, however, things have changed on this front. Streaming still isn't quite cable, but it's getting closer. The cord-cutting movement has become palpable now that streaming platforms like Sling TV from Dish Network (DISH -3.00%) and Alphabet's (GOOG -1.39%) (GOOGL -1.40%) YouTube TV are viable alternatives to conventional cable. Each offers live network programming in addition to on-demand options.

The impact of live-streaming on traditional cable is only about half-realized right now though, according to numbers from Screen Engine/ASI's research arm The Diffusion Group (TDG). Another huge chunk of current cable customers is expected to shun traditional TV service and instead opt for streaming in the very near future.

Woman watching streaming TV with remote in hand and socked feet propped up

Image source: Getty Images.

One or the other, but not both

All things considered, cable names like Comcast (CMCSA -1.94%) and Charter (CHTR -3.68%) had a pretty good run. As of mid-2018, 37% of consumers subscribed to a virtual multichannel video programming distributor's (vMVPD) service like Sling TV also subscribed to a conventional cable service. It suggests that even those so-called streaming skinny bundles weren't quite enough for consumers. In fact, Sling TV was the top name in that small sliver of the video entertainment market.

That's changed dramatically in just the past couple of years. As of right now, TDG estimates that only 23% of virtual -- or streaming -- cable subscribers are also still paying for TV from a conventional cable provider.

Sling TV is no longer the sole power player in the arena, for the record. MoffettNathanson estimates that, as of the end of Q1, Walt Disney's (DIS -2.60%) Hulu + Live TV boasts 3.3 million paying customers. Tied with Sling TV for second is the aforementioned YouTube TV from Alphabet, each with an estimated 2.3 million members. Sling TV seems to have led a net loss in the world's total number of vMVPD subscribers though, with only YouTube TV and Hulu + Live TV able to add customers on a net basis.

It should be noted that TDG's research doesn't wholly point to a loss in the total number of linear cable customers. A sheer increase in the number of virtualized cable TV customers among consumers who didn't or will never have a conventional cable service could also drive the total percentage of dual subscribers lower.

But the takeaway is still the same. That is, people are increasingly finding skinny bundles to be an acceptable alternative to conventional cable, and that paradigm shift is only likely to carry on. TDG estimates that by 2022 only 10% of vMVPD subscribers will still also be traditional cable customers.

No going back now

This is of course an expanding challenge for cable companies like Charter and Comcast, the latter of which is answering back with a stand-alone streaming product of its own. Peacock doesn't quite qualify as a skinny bundle akin to Sling TV or YouTube TV, as its video library is limited to NBC and Universal content, both of which are owned by Comcast. Still, Peacock is something of a step up from Disney+ or Netflix in terms of entertainment content, as it will offer some programs in an on-demand format at almost the same time they're being aired to linear cable customers. In the meantime, both Charter and Comcast provide lots of on-demand content to current customers or their respective linear cable offerings.

Nevertheless, TDG's numbers underscore what investors might already innately suspect -- consumers are increasingly shunning conventional cable now that cheaper, comparable, viable streaming alternatives are available. It's possible TDG's expectation that only 10% of virtualized cable customers will also still be paying for linear cable in 2022 actually overestimates traditional cable's hold on its current customers.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. James Brumley owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Netflix, and Walt Disney. The Motley Fool recommends Comcast and recommends the following options: long January 2021 $60 calls on Walt Disney and short July 2020 $115 calls on Walt Disney. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Comcast Corporation Stock Quote
Comcast Corporation
CMCSA
$31.84 (-1.94%) $0.63
Charter Communications, Inc. Stock Quote
Charter Communications, Inc.
CHTR
$321.66 (-3.68%) $-12.30
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$98.74 (-1.40%) $-1.40
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$99.50 (-2.60%) $-2.66
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$226.41 (-4.49%) $-10.64
DISH Network Corporation Stock Quote
DISH Network Corporation
DISH
$15.20 (-3.00%) $0.47
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$99.17 (-1.39%) $-1.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.