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Earlier this year, I reported that the use of TV antennas was on the rise, posing a threat to cable names like Comcast (NASDAQ: CMCSA) and charter (NASDAQ: CHTR) already fighting a strong cord-cutting movement. While old-fashioned over-the-air broadcasts might not deal a fatal blow to the linear cable industry, they could certainly exacerbate the headaches of on-demand alternatives like Netflix (NASDAQ: NFLX) and Walt disney‘s (NYSE: DIS) Hulu chat.
However, TV antennas can cause more damage than I initially suggested, according to a recent survey by technology market research firm Parks Associates. Its poll, conducted in the third quarter of last year, found that among American homes with a high-speed internet connection – homes that can tune into multiple free, low-cost video streaming sites – 25 % of them also used an aerial television. antenna. This is up from just 15% a year earlier.
Now, don’t rush into an extreme assumption. Almost 80% of these consumers still watch cable TV and about 60% of these broadband subscribers stream video from a service like Hulu or Netflix; owning an antenna does not necessarily exclude the use of a second or third choice.
On the flip side, the antenna trend is revealing – and troubling – for cable TV service providers when paired with another nuance of the poll.
Image source: Getty Images.
Aerial broadcasts are high tech and highly supported
Aerial television has come a long way in recent years. The new Advanced Television Systems Committee (ATSC) 3.0 standards – the new standard in the United States – call for ultra high definition 4K broadcasts as well as audio quality one would only expect from an Internet stream. The 3.0 standard also includes provisions for 8K video, whenever the world is ready for that big leap.
It’s not just the underlying technology that has seen significant improvements. Perhaps seeing the slow collapse of the traditional cable TV industry, media and TV tech giants are increasingly supporting free and localized broadcasts. Sony (NYSE: SONY) owns the GetTV live channel, which reaches around 80% of US consumers, and has engaged some of its best movie content on the platform, including franchises like Spider Man and Men in black.
Network of dishes‘s (NASDAQ: FLAT) The SlingTV streaming service easily supports the use of AirTV over the air (OTA) devices for its streaming video subscribers, arguably as a way to stay in the consumer TV viewing ecosystem. It is important to note that the AirTV player now supports recording and playing air TV broadcasts.
TV antennas are normalizing again
Sony and SlingTV’s moves mirror what the Parks Associates data says: the old-fashioned antenna is making a comeback, ultimately rooted in the one thing streaming companies struggle to do. That is, to provide consumers with news that is geographically relevant to them.
“Local news is important to most households: Local broadcast channels are the most preferred types of channels and news is the most preferred broadcast content,” said Steve Nason, research director of Parks Associates . He believes COVID-19-related lockdowns led to even greater antenna use since the third quarter of last year before the outbreak took shape.
The eventual end of the pandemic won’t necessarily return these consumers to their pre-epidemic viewing habits either, given a nugget of data that emerged from the survey. It turns out that while only about a quarter of broadband households actively use a television antenna, those who do tend to watch more television than the average broadband household. If teaching new users how to navigate the live choices and making them comfortable with this type of programming is the big hurdle, the coronavirus pandemic may leave air broadcasters in a much better position than they were before. is barely three months old.
Another finding of the survey that should concern cable companies like Charter and Comcast: while about half of antenna owners are still customers of some sort of paid video service, the other half of antennas using 25% of Broadband households – about 12% of the total surveyed – do not subscribe to any type of pay television service. This includes live TV streaming options like SlingTV or Hulu Live, which could easily use the broadband connection they already pay for.
Granted, that’s still not a very large part of the consumer market. Deloitte estimates that the United States will end 2020 with 41 million regular broadcast antenna users, compared to a national population of around 330 million. Deloitte’s estimate of just 84 million pay-TV subscribers will mark a sixth consecutive year of decline, however, from more than 100 million cable subscribers in 2014. The opposing trends highlight the problem facing them. linear cable companies.
Join the dots
To their credit, cable giants Charter and Comcast seem to see the writing on the wall – the latter perhaps more than the former. As fellow Fool Adam Levy pointed out earlier this year, for better or worse, Comcast has lost interest in suing unprofitable cable TV subscribers. Broadband is the livelihood that most cable companies now want to focus on, simply because it’s a customer relationship with many options for the provider, including selling the provider’s own streaming service. this provider to its high-speed Internet consumers. Aerial TV shows completely bypass the need for an internet connection, leaving the likes of Charter and Comcast completely out of the loop.
We now know that these aerial TV shows are rapidly gaining ground. Whatever the cable industry does to avoid the impact of the cord cut, it might want to do more and faster.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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