Fitch Report: Only 10-20 Percent of Homes are Possible Cord-Cutters

NEW YORK: The proliferation of over-the-top (OTT) television platforms will not cause widespread cable TV subscription cancellations, says Fitch Ratings, nor will it effect the credit ratings of U.S. pay-TV platforms.

According to Fitch, only 10 percent to 20 percent of the overall U.S. population are seen as possible cord-cutters. Middle-income homes are among those in this so-called "high-risk" segment, alongside those with low levels of TV consumption, single-person homes, tech-savvy individuals and younger demos. However, even within this segment there are mitigating factors, Fitch notes, including a less compelling lineup on over-the-top (OTT) services, the OTT viewing experience, the lack of live sports programming, the convenience of DVRs and other advanced services provided by pay-TV systems.

Moreover, Fitch says that cord-cutting will have no material impact on free cash flow generation or credit profiles at major pay-TV platforms despite some intermediate-term subscriber losses. Fitch estimates that subscriber losses would have to exceed 4 percent annually for ratings to be affected.

"Consumer demand for high-quality and expensively produced programming will remain," said Melissa Link-Cohen, director of Fitch Ratings. "The large, well-capitalized content providers are crucial to the industry and will remain so. We expect them to remain rational players and not sign deals that reduce the long-term value of their content."

Those best-positioned to take advantage of OTT opportunities are content owners; cable networks that rely on the acquisition of syndicated content, Fitch says, face an "elevated risk" of smaller audiences and an impact on their business models. Home entertainment revenues are also likely to take a hit in the OTT world.