By Shalini Ramachandran
Cablevision Systems Corp. Chief Executive James Dolan said the
number of customers paying for the traditional bundle of TV
channels is going to shrink by about 20% to 25% over the next five
years, as consumers opt instead for smaller packages of channels or
online video options.
Mr. Dolan warned an investor conference Tuesday that the
reduction in subscribers is "going to have an impact on the
programmers" -- the big media companies that collect fees for each
customer who receives their TV networks. For operators such as
Cablevision, selling higher-margin broadband service could help
make up for dwindling video customers.
The shift is spurred, in part, by channel owners themselves
going "over the top" and selling online video services directly to
consumers, such as Time Warner Inc.'s Web subscription to HBO Now
and similar offerings from CBS Corp.'s CBS and Showtime. Those
products are going to become "more and more attractive to
customers," Mr. Dolan said.
Big television channels have already lost millions of customers
from cord-cutting (abandoning traditional pay TV altogether) and
cord-shaving (downgrading cable packages to inexpensive, skinnier
bundles from cable and satellite TV providers like Verizon FiOS and
Dish Network Corp.). A Wall Street Journal analysis of Nielsen data
last year showed that the top 40 most widely distributed channels
in 2010--networks such as CNN, ESPN, and USA--had lost an average
of 3.2 million subscribers, or more than 3% of their distribution,
over the previous four years.
Cablevision has joined the skinny bundle trend. In April,
Cablevision launched low-cost, "cord-cutter" packages with
broadband service and a free digital antenna to pick up local TV
signals.
Mr. Dolan said popular channels will do "just fine," especially
if they have lots of original and scripted content. But
lesser-watched and niche channels--which have benefited from being
packaged together in a big bundle with more popular channels--are
going to have a harder time.
"You're not essential anymore," he said.
Mr. Dolan has been outspoken about his belief that cable
operators may one day stop selling video services, focusing instead
on broadband service. Over the past year, the trend of operators
adding Internet subscribers and losing video customers has
accelerated, he said.
As a result, Cablevision has shifted its focus to boosting the
reliability and speeds of its "connectivity" products, including
with a new Wi-Fi-only mobile phone offering. Internet service is
more profitable than cable television because it doesn't carry big
programming costs.
Write to Shalini Ramachandran at
shalini.ramachandran@wsj.com
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