Cord-cutting is not going away anytime soon, according to American Cable Association CEO Matt Polka.
Speaking during an interview for C-SPAN's "The Communicators" series set to air on television on June 3, Polka, whose association represents small and medium-size cable operators, described cord-cutting as "the video issue of our time."
Mediacom's Tom Larsen and American Cable Association's Matt Polka
Polka said cable companies nevertheless remained well positioned in the marketplace as a result of their broadband offerings.
"The cable business isn't what it used to be," Polka said, noting that on the video side of the business, costs have continued to increase as the number of cable networks have grown, as sports rights have become more expensive and as broadcast networks have introduced higher retransmission consent fees.
"As a business, it is failing. It is very, very difficult for a cable operator in many cases to even break even on the cable side of the business, which is why broadband is so important," he said.
Mediacom Communications Corp. Senior Vice President of Government and Public Relations Tom Larsen agreed that video is his company's "worst product" in that it "makes the least amount of money" for Mediacom. Meanwhile, Mediacom's broadband business has seen "tremendous growth."
While Larsen emphasized that Mediacom is not ready to throw in the towel on video, he is hoping for a significant change in how the industry operates. He would like to see a culling of certain networks and a reconsideration on the value of sports programming.
"We need to have a really serious look at what we're spending on sports in this country. The amount of money that broadcasters and ESPN and some of these regional sports networks are shelling out for the rights to broadcast games is just absurd," Larsen said, noting that networks recoup these programming costs by charging pay TV service providers more.
According to Kagan data, Walt Disney Co.'s ESPN will earn monthly affiliate revenue of $7.54 per average subscriber in 2017, up from $7.04 in 2016. Kagan is a media research group within S&P Global Market Intelligence.
Kagan analyst Derek Baine recently estimated that based on existing multiyear contracts, ESPN's programming costs will grow at 6% compound annual growth rate from 2017 through 2021. This would bring ESPN's programming budget to $10.1 billion by 2021, up from $5.0 billion in 2011.