Analyst: Cord-Cutting Has Gotten 'Freakin' Ugly,' Ad Growth Also Suffering

Cable operators’ second-quarter results show that the rate of cord-cutting has gotten “freakin’ ugly,” in the words of Michael Nathanson, of the MoffettNathanson analyst firm.

“With Comcast’s, AT&T’s and Charter’s 2Q earnings in the books, the early read on traditional cord-cutting is freaking ugly,” he wrote in a research note on Monday.

The three big media companies reported a combined loss of more than 1.2 million traditional video subscribers, he noted.

AT&T lost 946,000 subscribers, including 778,000 DirecTV and U-verse and 168,000 from its DirecTV Now streaming service. That means it now has 21.58 million traditional video subscribers and 1.34 DirecTV Now subscribers — representing year-over-year declines of 8.7% and 25.9%, respectively, notes Broadcasting + Cable.



Comcast lost 224,000 video subscribers (209,000 residential and 15,000 business) in Q2, bringing its video subscriber total down to 21.64 million. It also reported that its business services subscribers are down to 1 million, B+C reports.

Meanwhile, Charter lost 150,000 residential video subscribers (versus 73,000 in the year-ago Q2), leaving that total at 15.8 million for the quarter. However, it added 9,000 small and medium business video subscribers, for net subscriber losses of 141,000.

MoffettNathanson is projecting an overall cord-cutting rate of 5.5% for Q2 — a new quarterly high — and believes that the rate of decline will continue to accelerate this year.

Even when virtual MVPDs—which are gaining subscribers—are factored in, the overall loss rate is 2.7%, according to Nathanson.

Cancellations of traditional video service subscriptions and declines in viewership are also depressing advertising growth, says Nathanson, who projects flat advertising spend for the quarter — including a 1% gain for cable (to $5.6 billion) and a 1% decline for broadcast (to $3.2 billion).

He also pointed out that cable’s C3 ratings declined by 14%, and broadcast networks’ by 9%, in Q2.

In addition, the quarter may prove to be the weakest on record for cable networks’ affiliate fee growth (4%, down from 6% in the last two quarters), although growth of retransmission fees continues to be healthy, he wrote.

Cable networks’ audience reach has dropped by 7% and broadcast networks’ reach has dropped by 17% over the last five years, he points out.

The bright side, of sorts: Because the subscribers remaining are heavy viewers, the average lengths of per-viewer tune-ins to individual networks has increased from 20.4 minutes to 23.7 minutes for cable and from 28.1 to 32.2 minutes for broadcast during the same period, Nathanson reports.

And despite these trends, he noted, Viacom, CBS, Discovery, Disney and other media stocks are still beating the S&P 500.

While praising traditional operators’ attempts to drive growth by adding streaming offerings and live programming, Nathanson nevertheless stressed that “the data points should raise serious concern over the rate of decay of the traditional ecosystem.”

His conclusion: “Man the lifeboats!”

7 comments about "Analyst: Cord-Cutting Has Gotten 'Freakin' Ugly,' Ad Growth Also Suffering".
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  1. Ed Papazian from Media Dynamics Inc, July 30, 2019 at 9:13 a.m.

    Karlene, surely they aren't claiming that the combined reach---of homes?---for all of basic cable is 12.5%. Actually it's more like 70%, And surely, they aren't saying that the reach of the five broadcast TV networks is 60.2% when upwards of 88% of all homes get broadcast TV.

  2. Dave Madsen from Morningside College replied, July 30, 2019 at 9:39 a.m.

    Yes, Ed...I'm wondering about those numbers, also. Karlene, can you help us?

  3. Mark Laurence from Greater Media, July 30, 2019 at 10 a.m.

    It’s not cord-cutting that’s ugly. It’s the fees tacked onto every cable deal. Any $79.99 offer will grow to well over $100 with stacks of fees that should be included as a business expense, or eliminated. Why should anyone have to pay $10/month for a broadcast signal that’s transmitted for free? Or any fee for cable channels that inundate viewers with 18 minutes/hour in ads? Or $10+ for equipment that only delivers the services that were advertised in the first place? HD and DVR service should be basic in 2019 for all. 

    Cable networks have been bidding up prices for sports and entertainment for decades, using subscriber fees to pay when subscribers don’t care what channel the event lands on. Cord-cutting is the only way consumers can say “stop!”

  4. Robert Marich from, July 30, 2019 at 2 p.m.

    To me, a big part of the problem is basic cable networks have stuffed too many commercials in programming. The programs are fine but the viewing experience is poor. It's not a good consumer value considering consumers know they are paying substantial cash subscription fees too.

  5. James Smith from J. R. Smith Group, July 31, 2019 at 4:30 a.m.

    Robert, I respectfully disagree with your point that the "programs are fine." Content is part of the value proposition as is, per your note, the viewing experience (clutter). The classic cable operator channel bundle (tiers) and cable network reliance on long term carriage contracts +sub fees is obviously not working in the consumer calculus.  Over time, streaming (OTT) is likely to face a similar fate...but for now at least, the commercial load seems more reasonable.

  6. Ed Papazian from Media Dynamics Inc, July 31, 2019 at 7:28 a.m.

    James, I tend to agree with Robert about the commercial clutter on cable being at least one of the issues that stimulates cord cutting. It's pretty clear that the average commercial break on a cable channel---with 25% more ads than its broadcast counterpart, has a significantly higher mental tune out rate for advertisers---as manifested by commercial recall studies. However, to pin all of cord cutting on commercial clutter is a mistake. Obviously, assumed cost savings are the biggest incentive ---in particular for light and moderate viewers---but not---in my opinion---for chronic heavy viewers who generate well over half of the audience tonnage.

    I do agree with you that the quality of cable fare can be an issue as cheaper programming and a heavy reliance on reruns is basic to cable's business model. On the plus side, however, is the very wide diversity of cable content compared to broadcast TV. The latter gives you endless doses of the same types of programming---talk shows, nightly news, game shows, "Judge Judy" shows, plus highly predictable sitcoms and dramas--and fairly conservative primetime "reality fare. On cable almost everything is there---if you want it---and can find it. Which is why Netflix subscribers who have "pay TV"---and many do---tend to watch a considerable amount of cable fare but very little broadcast TV content. Why? They crave variety.

  7. Nicholas Schiavone from Nicholas P. Schiavone, LLC, August 8, 2019 at 7:22 p.m.

    Cord-Cutting Has Gotten 'Freakin' Ugly,'

    "For every complex problem there is an answer that is clear, simple, and wrong."

    H. L. Mencken

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