Cable business models today are driven by providing internet service, not video; as a result, cord-cutting is a non-issue.

The streaming wars are here, and the battle is fierce. The “Big Four” (Netflix, Amazon, Disney+ and HBO) are fighting for consumer eyeballs and wallets, with each other and many smaller, often niche, streaming services. Collectively, the players are throwing a staggering amount of money at this opportunity.

And by all accounts, these efforts are having a profound impact on the industry. The 2021 Emmy Awards are a case in point, where the Big Four garnered a combined 87 awards. (The top performer among traditional television networks was NBC with eight—nearly all for Saturday Night Live.) The leading edge of creativity has clearly shifted to streaming at the cost of legacy television.

Consumers have rewarded the fresh programming, and the ability to break free from the rigid cable bundles of the past, by “cutting the cord” and moving to a streaming paradigm.

At first glance, one would assume cord-cutting would have a profoundly negative impact on cable. Cable’s origins are as providers of video television service, and even after prodigious cord-cutting in recent years cable still serves over 40 million video households. Financially, the video product is still a substantial revenue generator for cable companies, generally accounting for one-third of total revenue. When a cable customer cuts the cord, there is a direct reduction in this revenue line item—and if current trends are any indicator, cord-cutting will continue (and possibly accelerate) going forward.

Video, however, is a low-margin business, due to costs that cable companies must pay for the content. Many cable companies describe their video business as “break-even” or close to it.

Rather than video, the cable business is now focusing on internet service. And unlike video, internet service is a cable company’s highest-margin product.

In addition, moving to a streaming solution requires the customer to have a fast internet connection. Thus, when a cable customer cuts the cord and drops cable video, they inevitably subscribe to a higher-speed internet tier, adding even more high-margin revenue to the cable company’s income statement.

So, while the “death of the cable bundle” may be nigh, the cable companies themselves are not only unimpacted, but arguably poised to benefit, as their internet services become even more important for consumers. This dynamic reaffirms our generally positive view of cable credits.