Moody’s: Broadband Buys Cable Time in OTT Battle

Report Says Broadband, Limited Competition Gives Cable Time to Adapt

Credit ratings agency Moody’s Investor’s Service says high-yield cable companies remain strongly positioned against the over-the-the top threat at least for the next few years, mainly because of the expected continued strength of their broadband businesses.

In a new report – “High Yield Cable's Broadband Still Effective Defense Against Over-the-Top Siege“ – Moody’s said that broadband, coupled with limited competition and customer inertia would give cable operators time to adapt to the rise of new entrants to the sector.

“OTT options will take a small number of traditional pay TV subscribers, but the shift in the pay TV sector will be evolutionary, not revolutionary,” said Moody’s vice president Karen Berckmann in a statement. “Content providers are treading cautiously so traditional cable operators have the chance to build financial flexibility and prepare in case industry fundamentals change more significantly.”

Broadband subscriber additions are expected to continue to outpace video customer losses for the next few years, with the biggest risk being underinvestment.

“We anticipate nearly all rated operators will direct capital to enhancing ehir broadband offerings,” Moody’s said in the report.

Moody’s estimates that despite new OTT entrants like Sling TV, Sony’s PlayStation Vue and HBO Now, cable operators have about five years – the traditional length of the high-yield investment cycle – to come up with a solution. 

Cable operators, particularly larger ones, need to continue to invest in video and get the word out concerning the value of heir bundles – Moody’s noted that most customers don’t realize what they’re getting with traditional TV.

“The average customer may not realize how much content traditional pay TV service provides, from video on demand and across multiple devices,” Berckmann continued. “Customers are often more willing to give new entrants a break on any operational hiccups merely out of a predisposition to prefer anyone over a traditional cable company.”
Moody’s analysts said rising bills could accelerate TV customer defection and risk pricing out non-affluent consumers entirely.