Wall Street has been hearing a lot from media executives in the past few weeks on the prospect of subscribers cutting the cord on cable in favor of over-the-top video, but Sanford Bernstein analyst Craig Moffett argues that "real-world evidence of cord-cutting remains scant."
Nonetheless, he wrote in a research note that "investors, perhaps inevitably, are coming down on the side of cord-cutting in this debate, and are more than a little skeptical of blaming cyclical factors" like housing and employment.
Moffett noted it is understandable that there appears to be a repeat of 2005, when over-the-top video made headlines and the news that ABC's hit series Desperate Housewives would be put on iTunes was declared the "death of cable."
Drivers for that attention, he said, include TV efforts by Apple and Google and Sezmi's wrapping-up of another round of financing.
Moffett didn't write that cord-cutting is not an issue. Rather to the degree that it is or could become an issue, the driver is not yet the sort of "bleeding-edge" technology adoption that drove those 2005 headlines. Instead, he said, it is "poverty," by which he means more cyclical factors like income stagnation and a weak consumer. "Anemic income growth," he said, "threatens to make pay TV unaffordable."
Moffett suggested that a weak housing market could be one factor in the drop, as well as comparing 2010 figures to 2009, when there was a one-time influx of subs tied to the DTV transition.
But perception could become the new reality anyway: "Of course, whether household formation rates and the digital
TV transition really are to blame for cable's subscriber weakness may not much matter. The cord-cutting boogeyman
is now back."