Why cable providers will survive despite rise in cord-cutting: Wells Fargo

Yahoo Finance's Alexandra Canal breaks down the latest outlook for cable providers as more Americans cut the cord and opt for streaming platforms.

Video Transcript

ZACK GUZMAN: But when we look at the cost of cord-cutting, I guess, maybe not impacting HBO Max or HBO and AT&T all that much. But when we look at some of the other entities out there, how is that changing the way that we're all thinking about maybe ditching cable instead?

ALEXANDRA CANAL: Right. So earlier this month, I did break down a survey about how the coronavirus could be accelerating the demise of cable TV. And that seems to be holding true the longer this pandemic drags on, as more and more Americans cut that cord. But according to a new analyst note from Wells Fargo, the impact to these cable providers financially might not be as significant as you would think.

So as we look at the details of this note, subscriber losses are expected to continue through 2021 for some of these major US cable providers. Comcast, for example, is expected to lose up to 1.37 million subscribers by that year. That's higher than the original estimates of around 1 million. So although these subscriber losses are expected to continue, the impact on adjusted EBITDA and free cash flow is actually not that significant.

So Wells Fargo tested three different scenarios. And even in the most extreme case of cable cutting, the financial impact wasn't that great. And that's largely due to the dependence on broadband. So as more households add these over-the-top streaming platforms, it's going to convince them to want to upgrade their broadband pipeline. And that in turn is going to increase overall broadband revenue growth.

So it's not doomsday for these cable companies. It is interesting to see that wells Fargo also expects cord-cutting to continue to accelerate. But that doesn't necessarily mean the end of these cable providers, at least right now. All right, the latest on the streaming front, Alexandra Canal, in this week's Fame and Fortune. Appreciate that.