• by Wayne Friedman , August 6, 2018

Total traditional pay TV providers lost more subscribers in the second quarter, and made up ground when virtual pay TV services were added in -- but only barely.

MoffettNathanson Research estimates there was a 0.1% gain in the second quarter to total 97.223 million pay TV homes. Traditional pay TV providers sank 3.3% (849,000) to 91.2 million, while virtual (internet-based) pay TV companies grew 115% (691,000) to 6 million.

“It appears that total subscriptions for live TV, including vMVPDs, may have actually grown in Q2. If so, it would be the first time we’ve seen a positive number since 2012,” writes Craig Moffett, senior research analyst at MoffettNathanson.

The decline for traditional pay TV was better than the second quarter of 2017, which lost 973,000 subscribers.

Cable operators had an easier time, losing 1.9% (301,000)  to 51.2 million, while satellite companies sank 5.1% (483,000) to 30.6 million; and telco-based TV providers were down 4.8% (65,000) to 9.3 million.

A key factor in this gain was new household formations of 470,000 -- a sharp reversal of the first-quarter period, which dropped 168,000 and up substantially over the 18,000 gain in the second quarter of 2017.

“The stronger the growth in new households, the higher the expected number of pay TV subscriptions,”  says Moffett. This is “a dramatic improvement from what was essentially zero growth a year ago.”

Moffett cites a second crucial measure — whether companies that own both traditional pay TV providers and lower-cost virtual pay TV providers can keep customers when they want to change the cheaper service. Monitoring this comes by a conversion rate.

“We still estimate that the average conversion rate over the last few years is around 85%. That’s great news for the media companies, or at least for those lucky few media companies included in most or even all of the vMVPD packages.”