Market Analysis – 83111801 – Cable television services

Executive Summary

The global market for traditional cable television services is mature and contracting, with a projected 3-year CAGR of -1.8%. The market is dominated by a few large, regionally-focused incumbents whose primary value proposition is now bundled high-speed internet access. The single greatest threat to this commodity is technology obsolescence, driven by consumer migration to more flexible and cost-effective Over-the-Top (OTT) streaming services, a trend known as "cord-cutting." The key opportunity for procurement lies in leveraging this shift to unbundle services and negotiate more favorable terms on high-demand internet connectivity.

Market Size & Growth

The global cable television services market is valued at est. $181.2 billion in 2024. The market is in a state of structural decline, particularly in North America and Europe, with a projected 5-year compound annual growth rate (CAGR) of -2.1%. This contraction is driven by intense competition from streaming video on demand (SVOD) and virtual multichannel video programming distributors (vMVPDs). The three largest geographic markets are 1. North America, 2. Asia-Pacific, and 3. Europe, with North America representing the largest share of revenue but also the fastest rate of decline.

Source: Internal analysis based on data from Statista and Grand View Research.

Key Drivers & Constraints

1. Constraint: Cord-Cutting & OTT Competition. The primary market constraint is the consumer shift from traditional cable packages to OTT streaming services (e.g., Netflix, Disney+, YouTube TV). This trend erodes the subscriber base for the core video product.
2. Driver: High-Speed Internet Bundling. Cable providers are mitigating video subscriber losses by bundling television with high-margin broadband internet. For most customers, internet is the primary purchase driver, making cable TV an add-on service.
3. Constraint: Soaring Content Costs. The cost of programming, especially for live sports (e.g., Regional Sports Networks) and broadcast channels, continues to escalate. These costs are passed directly to consumers through higher package prices and specific surcharges, fueling further cord-cutting.
4. Driver: Live Sports & News Exclusivity. Exclusive rights to live sporting events and major news networks remain a critical differentiator and a key retention tool, as these are often unavailable on basic OTT platforms.
5. Constraint: High Capital Intensity & Regulation. The industry requires significant capital investment to maintain and upgrade physical network infrastructure (e.g., to DOCSIS 4.0). Operations are also governed by local and national franchise agreements and "must-carry" regulations, which add complexity and cost.

Competitive Landscape

Barriers to entry are High, due to extreme capital intensity required for physical infrastructure, entrenched regional monopolies, and complex regulatory franchising requirements.

⮕ Tier 1 Leaders * Comcast (Xfinity): Largest U.S. provider, leveraging its scale to bundle cable, broadband, mobile (MVNO), and home security, while owning a vast content portfolio (NBCUniversal). * Charter Communications (Spectrum): Second-largest U.S. provider, focused on network upgrades and geographic expansion while aggressively growing its Spectrum Mobile service. * Liberty Global: Leading international conglomerate with major operations in Europe, differentiating through strategic joint ventures (e.g., with Telefónica, Vodafone) and market consolidation.

⮕ Emerging/Niche Players * YouTube TV (Google): A leading vMVPD offering a cable-like channel bundle over the internet, representing a direct substitute for traditional cable. * Hulu + Live TV (Disney): Combines a large on-demand library with a live TV channel package, leveraging Disney's extensive content portfolio. * FuboTV: A sports-focused vMVPD that has carved out a niche by offering extensive sports programming, including 4K broadcasts.

Pricing Mechanics

The pricing model for cable television is notoriously complex and lacks transparency. The final monthly cost is typically a sum of a base package price, fees for premium tiers (e.g., HBO, sports packages), and a series of mandatory pass-through fees and surcharges. The advertised promotional rate often excludes 20-30% of the total bill, which is comprised of equipment rental fees (set-top boxes), Broadcast TV Surcharges, and Regional Sports Network (RSN) fees. These fees are not government-mandated taxes but are created by providers to recoup specific operating costs—primarily programming—without raising the advertised package price.

Negotiating leverage is limited for standalone video services. The most effective strategy is to negotiate pricing within a larger bundle that includes high-speed internet and/or mobile services, where providers have more margin and flexibility. The most volatile cost elements, which drive annual price increases, are:

1. Programming Costs (Content): +5% to +10% annually, driven by contract renewals with content owners like Disney and Warner Bros. Discovery.
2. Regional Sports Network (RSN) Fees: +8% to +15% annually in some markets; these are a primary driver of consumer dissatisfaction and are increasingly being challenged or dropped by providers.
3. Broadcast TV Surcharges: +10% to +20% annually, reflecting the fees demanded by local broadcast affiliates (ABC, CBS, NBC, Fox) for retransmission rights.

Recent Trends & Innovation

• Intensifying Carriage Disputes (Sep 2023): The high-profile dispute between The Walt Disney Company and Charter Communications resulted in a 10-day blackout of channels like ESPN and ABC for nearly 15 million subscribers. The resolution set a new precedent, with Charter gaining the ability to include ad-supported Disney streaming services in some packages, signaling a major shift in the cable model.
• The "Great Re-Aggregation" (2022-2024): Cable providers are shifting their strategy from content gatekeepers to "super aggregators." They are integrating third-party streaming apps (Netflix, Max, etc.) directly into their set-top boxes and user interfaces, aiming to remain the central hub for home entertainment and billing.
• Accelerated Shift to IP Delivery (Ongoing): Companies like Comcast are actively transitioning customers from traditional QAM-based video delivery to IP-based platforms (e.g., Xfinity Flex). This reduces network complexity, enables more interactive and app-like features, and blurs the line between traditional cable and streaming.

Supplier Landscape

Regional Focus: North Carolina (USA)

Demand for traditional cable TV in North Carolina mirrors the national decline, with significant cord-cutting in major metro areas like Charlotte and the Research Triangle. However, the state's strong population and business growth fuels robust demand for high-speed internet, which is the primary product for cable incumbents. The market is dominated by Spectrum (Charter), with Comcast (Xfinity) and smaller providers like Altice (Suddenlink) serving specific territories. Competition is intensifying from fiber providers such as AT&T Fiber and Google Fiber (in select cities), which puts downward pricing pressure on the incumbents' crucial broadband business. North Carolina's statewide video franchising law simplifies the regulatory environment for providers, and a 7% state tax is levied on video programming services.

Risk Outlook

Actionable Sourcing Recommendations

1. Prioritize Broadband in Negotiations. Shift sourcing focus from video services to securing best-in-market rates for high-speed data. For multi-site RFPs, mandate that suppliers provide unbundled, data-only options alongside bundled offers. This allows for a clear cost-benefit analysis and leverages the supplier's need to retain high-margin internet contracts, often resulting in video services being offered at a steep discount to secure the entire account.

2. Implement Centralized Invoice Auditing. Consolidate all cable service billing under a master corporate account and conduct bi-annual audits to reclaim funds from erroneous charges, particularly for equipment rentals and incorrect fee applications. Use audit findings as leverage during contract renewals to negotiate caps on future increases for volatile surcharges like the Broadcast TV Fee, which can mitigate annual price creep by 5-10%.