Media

Cable companies now selling more broadband than video. Duh.

Inside a Facebook data center in Prineville, Ore.

Above: Inside a Facebook data center in Prineville, Ore.

Image Credit: Open Compute Project

The cable companies have been far more excited about selling broadband than selling video for a long time now. One cable exec, Cablevision CEO Jimmy Dolan, even suggested that his company might get out of the video business altogether.

Why? Because while broadband is a high-margin, low-competition business for the cable guys, selling video is a pain in the ass. TV and movie rights holders like Viacom and Warner Brothers are very hard to deal with. The cost of video content continue rising, and cable companies are stuck trying to raise cable prices at acceptable rates to cover the costs.

Then there’s those dang affiliates, some of whom are ready to go nuclear in squabbles with cable companies over rebroadcasting rights. This came into full view last year when Time Warner Cable went to war with CBS, and as a result millions of cable viewers in New York, Dallas, and Los Angeles lost access to CBS programming. The conflict was resolved just before the Superbowl last year, but both parties sustained losses in money and customer loyalty.

Retransmission costs are rising quickly, too. TV networks took $2.36 billion in fees in 2012, and that number is expected to rise to $6.05 billion (about 23percent of total TV station revenue) by 2018, according to SNL Kagan.

So it comes as no surprise that cable companies are gravitating toward selling broadband. And new report from Leichtman Research Group seems to make it official. The biggest cable players, Leichtman says, now have 49,915,000 broadband subscribers versus 49,910,000 video subscribers.

Comcast and Time Warner have been using competition in the video business to muddy the waters in the debate over the approval of their merger. But video has very little to do with it. The problem is that the merger would give one player 40 percent of the broadband market. That means less broadband competition and higher prices.

It might also give the two more bargaining power when buying video content, but it’s unlikely that any savings garnered there will be passed on to cable consumers. Why would they?