Just when it looks as if cable television companies like Comcast (CMCSA -0.57%) and Charter Communications (CHTR -0.60%) might be able to quell the cord-cutting movement, wham! A key content partner deals the industry another tough blow. According to reporting from Sports Business Journal, the National Football League is planning to launch a live game-streaming app in July, airing the same games available to football fans in their respective geographical markets.
At first blush, the move seems a bit pointless. Consumers can already watch these local games, if not through their cable plan, then via broadcasts picked up by aerial antennas. Even at the low cost of $5 per month, it's a solution to a problem that seemingly doesn't exist. Ergo, perhaps Charter and Comcast have nothing to worry about here.
Live sports is one of the key reasons people continue to pay $80 per month (or more) for cable TV; however, it's a development that cable company investors can't afford to ignore.
The top reason consumers pay for cable
The league itself has been stingy with details about its plans for a platform that circumvents cable companies, only saying it will be limited to mobile devices. But it comes as no real surprise since this is the next progressive step in a shift that's slowly but surely leaving cable behind. The NFL already offers access to out-of-market games through a service called Sunday Ticket, and it's partnering with several other distribution partners, including Dish Network (DISH 2.83%), to deliver game content.
Regardless, investors shouldn't dismiss the disruptive potential of this product for one overarching reason: Sports is the No. 1 reason consumers stick with cable TV rather than switching to lower-cost streaming. And sports is also the No. 1 reason people who've previously cut the cord come back to cable.
CableTV.com puts the matter in perspective. In a survey of several hundred U.S. consumers performed earlier this year, the market research outfit found that 19.5% of people continue to pay high prices for cable TV because there's no other viable way to get their live sports fix. In a similar vein, more than 18% of the survey's respondents who had already cut the cable cord say sports is the reason they reconnected their cable service.
Neither is seemingly a big figure. And given how the NFL is only one of several sports leagues that people may choose to follow, an alternative football platform hardly seems an existential threat.
Take a step back and look at the bigger picture, though. Sports was by far the top reason consumers keep or renew cable subscriptions, and at the same time, other professional sports leagues are slowly but surely moving away from their reliance on cable television services to air their products. Comcast's NBC offers Sunday night's feature football games via Peacock. The NBA, the NHL, and Major League Baseball all offer access to games without a cable subscription as well. In that professional football is the nation's most popular spectator sport yet Sunday Ticket costs a prohibitive $300 per season -- and isn't available to all fans -- this new offering may well be the one that prompts sports fans to cut the cable cord costing them on the order of $1,000 per year.
Even the industry stalwart is now open-minded
Were it just the NFL's latest move, it might be something to shrug off. It's not just the NFL, though. ESPN parent Walt Disney (DIS) is increasingly warming up to the idea of a cable-free existence as well.
During the company's first-quarter conference call, CEO Bob Chapek commented on the idea of a standalone streaming ESPN:
We're not ready to share the specifics of our model in terms of how long it would take for us to reach profitability on that or the impact that it would have on our linear business .... But I would emphasize that we're only going to do it if it's accretive to our shareholder value when it comes time to actually pull the trigger. But I can tell you that it will be the ultimate fan offering that will appeal to superfans that really love sports.
Read Chapek's phrasing again: "When it comes time to actually pull the trigger." For good measure, he added, "And I think there's nobody but ESPN that, frankly, could actually pull that off."
It's hardly ironclad evidence that a streaming version of cable TV's leading sports channel, ESPN, will soon be offered. However, it's a change of tone for the company's take on working outside cable's reach -- especially now that numbers from Nielsen indicate the channel's reach was whittled down 10% last fiscal year to only 76 million subscribers. That's down from a peak near 100 million households just a decade ago, with no end to the attrition in sight.
If cable's ESPN fully makes the leap online -- as is at least on the radar -- another one of consumers' top reasons to continue paying for cable television will evaporate.
Too big to ignore
To be fair, Dish Network, Comcast, Charter, and all the rest aren't doomed. Most of these cable players offer other revenue-bearing services, including broadband, which makes such streaming services possible. And it's a problem the industry has been handling for years now. These organizations know the score, so to speak.
For cable company investors, though, it's worth noticing that the pace of attacks on cable TV's marketability is accelerating, and perhaps nearing a tipping point. If nothing else, investors will want to keep their finger on the pulse of the ever-evolving sports-streaming market.