Why cable providers are expected to survive the rise in cord-cutting

Cord-cutting is expected to accelerate through 2021, but according to a new analyst note from Wells Fargo, the financial consequences for U.S. cable providers will be limited.

According to the report, subscriber losses will continue to climb the next few years with Comcast (CMCSA) expected to shed 1.37 million subscribers by 2021— up from previous estimates of 1 million.

“We see cord-cutting as a secular trend that likely will kick into high gear during and on the other side of COVID-19,” Wells Fargo’s Jennifer Fritzsche explained.

(Source: Wells Fargo)

Still, the firm predicts that the impact to adjusted earnings before interest, taxes depreciation and amortization (EBIDTA) and free cash flow will be limited — even in the most extreme cord-cutting circumstances — “given the substantial margin differential between broadband (+60%) and video (+15-20%).”

Fritzsche added that cord-cutting “only reinforces the need for a faster broadband pipe, which should drive further upgrades to higher speed tiers (and provide average revenue per user benefits).”

It’s positive news for cable providers, especially as coronavirus lockdown orders seems to be hastening the trend away from traditional cable packages.

Cord-cutting is ‘a secular trend that likely will kick into high gear during and on the other side of COVID-19,’ says Wells Fargo

According to The Trade Desk, which surveyed nearly 3,000 Americans last month, 64% of the respondents said they have either cut the cord, are planning to do so — or simply never subscribed to cable at all.

That number jumped to 75% for those aged 18-34 — suggesting that interest in cable is dwindling, especially amongst the younger generation.

“With only a quarter of young adults having any long-term interest in traditional cable TV, in a few years we won’t be talking about linear or cable TV at all. It will all be online and streaming,” The Trade Desk Chief Strategy Officer Brian Stempeck said in a statement.

Alexandra is a Producer & Entertainment Correspondent at Yahoo Finance. Follow her on Twitter @alliecanal8193

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