Moody's: Internet Video Poses No Real Threat to Cable

Earlier this week we noted how Sanford Bernstein are telling investors that none of the emerging Internet video services are a serious threat to cable, and that TV cord cutting is a concept "that sounds great in the abstract but crumbles when faced with the reality." A new research note from investment firm Moody's today takes a similar tack, arguing that limited competition and "customer inertia" means that cable giants don't have much to worry about from 2015's quickly-growing slate of new Internet video options.

"OTT options will take a small number of traditional pay TV subscribers, but the shift in the pay TV sector will be evolutionary, not revolutionary," insists Moody's Vice President Karen Berckmann. "Content providers are treading cautiously so traditional cable operators now have the chance to build financial flexibility and prepare in case industry fundamentals change more significantly."

Between cord cutters and cord nevers, it's estimated that the pay TV industry lost around 1.4 million customers last year. This year we're finally seeing the rise of a slew of new OTT choices from the likes of Dish, HBO, Sony, and eventually HBO and Verizon -- largely thanks to less restrictive broadcaster licensing deals. As such, it seems reasonable to expect to losses to remain small, but notably larger.

Still, Moody's argues that consumer inertia (read: laziness) and a general misunderstanding of the value cable provides means cable operators have plenty of time to adjust their business models. The firm estimates that the cable industry has about five years left to adjust to the shifting landscape before it feels to feel a major pinch, but does warn (as analysts have been doing the last five years) that the relentless parade of TV rate hikes simply aren't sustainable.

"The average customer may not realize how much content traditional pay TV service provides, from video on demand and across multiple devices," claims the firm.