Canoe Ventures

The impact of video cord-cutting and a growing intolerance for heavy advertising loads seem to be taking a toll on the cable industry’s lucrative advertising business.

Canoe Ventures, owned by Comcast, Charter Spectrum, and Cox, reports the number of ads being viewed by video-on-demand users rose just 4% in 2019, just a fraction of the growth the company reported over the past three years.

Many ad-supported cable networks make parts of their programming libraries available for on-demand viewing by video subscribers. Cable companies sell advertising that fills the original commercial breaks, sometimes resulting in a viewing experience comparable to live viewing — ads and all. But customers are increasingly turning away from cable video-on-demand, either because they are canceling their video packages or are becoming more intolerant of heavy ad loads.

Canoe Ventures claims its slowed growth comes from selling out ad inventory on the cable video-on-demand platform. But during the first six months of 2019, 13.1 billion ads were collectively viewed by customers, which is nearly identical to the 13 billion ads viewed during the same months in 2018. Assuming Canoe Ventures has nearly sold out all available space on its ad insertion platform, that should result in consumers seeing more ads. But with ad viewing almost flat, that likely means less video-on-demand content is being watched.

Cable system overbuilder WideOpenWest, better known to customers as WOW!, has begun offering its customers subscriptions to streaming video competitors fuboTV, Philo, Sling, and YouTube TV, in what could be a gradual move away from selling its own video packages.

WOW!, like every cable operator, is losing cable television customers to cord-cutting. As of the end of 2019, the company had just 381,000 video subscribers remaining, down another 6,300 in the last three months. Because of its small size, WOW! does not qualify for the steep volume discounts offered to cable television and satellite TV companies that have tens of millions of video customers. As a result, it either has to continue to raise prices or watch its cable television packages become unprofitable. WOW! has apparently decided it is smarter to partner with nationwide video streaming providers, if only to keep its broadband and television customers from switching to a competitor.

“WOW! has always put a high value on offering choices to consumers,” said WOW! CEO Teresa Elder. “This is one more way we’re empowering customers to determine when, where and how they consume information and entertainment. Our robust broadband network is the natural choice for high-speed data customers […] who want to access streaming services on their terms.”

WOW! specializes in providing service in communities already served by another cable operator. Many of its systems are in the Midwest, where it competes with Charter Spectrum, Cox, or Comcast.

WOW! will offer customers one free Amazon Fire TV Stick and a $25 rebate that can be used to buy other set-top boxes that will support streaming TV alternatives.

If successful, it may not be too long before WOW! stops selling cable television altogether, to focus on its broadband business.

Large media companies and streaming services are on to many of you.

If you are among the two-thirds of subscribers that have reportedly shared your Netflix, HBO GO, Hulu, or Disney+ password with friends and family, your provider probably already knows about it.

A recent report from HUB Entertainment Research found that at least 64% of 13-24-year-olds have shared a password to a streaming service with someone else, with 31% of consumers admitting they are sharing passwords with people outside of their home.

The reason many people share passwords is to save money on the cost of signing up for multiple streaming services. Many trade a Netflix password in return for a Hulu password, or hand over an HBO GO password in exchange for access to your Disney+ account. Research firm Park Associates claims that streamers lost an estimated $9.1 billion in revenue from password sharing, and can expect to lose nearly $12.5 billion by 2024 if password sharing is not curtailed.

Oddly, most streaming services are well aware of password sharing and the lost revenue that results from sharing accounts, and most care little, at least for now.

Marketplace notes a lot of the complaints about password sharing are coming from cable industry executives, shareholders, and Wall Street analysts, but for now most streaming services are just monitoring the situation instead of controlling it.

“I think we continue to monitor it,” said Gregory K. Peters, Netflix’s chief product officer, on the 2019 third quarter earnings call. “We’ll see those consumer-friendly ways to push on the edges of that, but I think we’ve got no big plans to announce at this point in time in terms of doing something differently there.”

Netflix sells different tiers of service that limit the number of concurrent streams to one, two, or four streams at a time. The company believes that if customers that share accounts bump into the stream limits, many will upgrade to a higher level of service which will result in more revenue.

Newcomer Disney+ not only recognizes password sharing is going on, it almost embraces it.

“We’re setting up a service that is very family friendly. We expect families to consume it,” Disney CEO Bob Iger said in an interview with CNBC. “We will be monitoring [password sharing] with the various tools that we have.”

The biggest tool Disney has to monitor account sharing is Charter Spectrum, which is aggressively encouraging streaming services to crack down hard on password sharing. Spectrum internet customers who watch Disney+ are now tracked by Spectrum, recording each IP address that accesses Disney+ content over Spectrum’s broadband service. When multiple people at different IP addresses access Disney+ content on a single account at the same time, Spectrum can flag those customers as potential password sharers.

Synamedia, a streaming provider security firm, uses geolocation tools to determine who is watching streaming services from where. If someone is watching one stream from one address and another person is watching from another city at the same time, password sharing is the likely culprit. For now, most companies are quietly collecting data to learn just how big a problem password sharing is and are not using that information to crack down on customers.

Streaming providers are more interested in stopping the pervasive sale of stolen account credentials on services like eBay and shutting down stolen accounts used to harvest content for unauthorized resale. But as sharing grows, so will calls from stakeholders to curtail the practice. Those in favor of vigorous crackdowns on password sharing argue billions of dollars of lost revenue will be lost. If a service like Netflix blocked password sharing, that could lead to dramatic increases in account sign-ups. But less established brands like Disney+ seem more concerned about losing the unofficial extra viewers that are watching and buzzing about shows on its new streaming platform. Find the best residential proxies to access the streaming content that is not available in your location.

Cable companies are frustrated about losing scores of cable TV customers to competitors that may be effectively giving away service for free. That has raised tempers at companies like Charter Communications.

“Pricing and lack of security continue to be the main problems contributing to the challenges of paid video growth,” Charter CEO Thomas Rutledge said in recent prepared remarks with Wall Street analysts. “The traditional bundle … is very expensive, and the actual unit rate of that product continues to rise, and that’s priced a lot of people out of the market. And it’s free to a lot of consumers who have friends with passwords. So our ability to sell that product is ultimately constrained by our relationship with content [companies], and we have to manage that in terms of the kinds of power that the content companies have.”

Charter’s power comes from its willingness to distribute cable networks like The Disney Channel to tens of millions of homes around the country. That forces Disney to listen to Charter’s concerns about piracy and password sharing and the issue is even documented in the latest carriage contract between the two companies.

Cable industry executives believe a crackdown on password sharing is inevitable, eventually. Just as the cable industry was forced to combat cable pirates during its formative years, streaming providers that welcome extra viewers today may lament the lost revenue those subscribers don’t bring to the table tomorrow.

Marketplace reports on the growing issue of streaming service password sharing. (2:19)

Most analysts are predicting this past year will be the worst yet for video customer losses, with nearly two million cable TV customers cutting the cord in 2019, up from 1.26 million in 2018. Business is even worse for satellite TV operators, which lost 1.2 million customers in 2018 and are expected to have shed another 3.25 million customers in 2019 — mostly because of mass customer defections at AT&T’s DirecTV. Altogether, over five million Americans are estimated to have cut the cord over the past year.

Investors have largely stopped worrying about video subscriber losses, and cable operators have boldly told Wall Street they have stopped chasing video customers threatening to cancel service, claiming many are no longer profitable enough to keep. Their key competitors, online streaming video services like Sling TV, AT&T TV Now, and Hulu with Live TV are also seeing subscriber gains slowing, most likely because of price increases. One analyst predicted these online cable TV replacements would add a combined 804,000 customers in 2019, less than half of the 2.3 million they added in 2018.

Cable companies seem unfazed, in part because of record-breaking gains they are expected to have made in internet and wireless customers in the last year. One analyst suggests that most of those gains are coming directly at the expense of phone companies.

Comcast and Charter are the two largest cable companies in the United States.

“Cable’s clear speed advantage in roughly half the U.S. is driving continued strong share performance,” Jayant told clients in a research note. Jayant expects some of the biggest gains will come from ex-DSL customers in Comcast and Charter Spectrum’s service areas.

Nationwide, cable operators likely added 3.1 million new broadband customers in 2019, up 15% over last year. Phone companies are predicted to have lost at least 402,000 internet customers, up from 342,000 in 2018. Most of those departing customers are not served by fiber broadband.

Both Comcast and Charter Spectrum are also successfully attracting a growing number of mobile customers, as is Altice USA. Charter and Comcast offer their broadband customers the option of signing up for wireless mobile service, powered by Verizon Wireless. Altice USA resells Sprint service at cut-rate prices.

Comcast is estimated to have added 778,000 wireless customers in 2019 and analysts predict that the company will add another 909,000 in 2020. Charter Spectrum is expected to have gained 923,000 wireless customers in 2019, with another 1.04 million likely to sign up in 2020. Altice USA’s deal with Sprint in its Cablevision/Optimum service area has already attracted about 80,000 customers, with 550,000 more likely to follow in 2020.

Another independent cable company is dropping cable television service.

Rainbow Communications of Everest, which serves customers in northeastern Kansas, has set a “TV End” date for customers of June 30, 2020, after which it will only sell broadband and phone service:

As your local communications provider, we strive to bring innovative solutions for both entertainment and business purposes. Now a high-quality and less-expensive technology exists for watching TV by using an internet connection. In fact, most of our customers have chosen this route because watching video now accounts for 80% of our internet network traffic. Therefore, we have decided to focus our efforts on delivering the best internet experience possible, and end our TV service offering.

Rainbow TV service will end on June 30, 2020.

Rainbow, like many smaller cable operators, faces spiraling costs for video programming without the benefit of the volume discounts large national cable companies routinely receive. As streaming live TV video providers expand, they can now out-compete many independent cable companies by delivering a lower cost lineup of video channels. As a result, a growing number of small cable companies are deciding to exit the video business, concentrating on selling broadband and, to a lesser extent, phone service to their customers.

Rainbow claims customers will save up to $600 a year dropping its cable TV service in favor of a streaming video package from providers like YouTube TV or Sling. As large streaming providers continue to add local over the air channels to their lineups, many consumers can get the same or better lineup from a streaming provider at a lower cost. Explore beds that feature built-in TVs to lounge better.

The move will also allow Rainbow to dedicate all of its cable bandwidth towards data services, including digital phone service. That could allow the company to boost broadband speeds.