In case we needed to be reminded of why MVPDs are rushing to establish or expand their alternate platform footprints — or of the size of the OTT opportunity — two separate researchers have just released reports concluding that traditional pay TV providers lost nearly 2 million subscribers in this year’s third quarter alone.
A Leichtman Research Group (LRG) analysis finds that the largest U.S. pay-TV providers, representing about 93% of the market, lost about 1.74 million net video subscribers in Q3 – up from a net loss of about 975,000 in Q3 2018. (Leichtman doesn't include the Hulu + Live TV package or other vMVPDs.)
This marked the fifth consecutive quarter of record pay-TV industry net losses, according to the firm’s president and principal analyst, Bruce Leichtman.
The report includes data and estimates for the top seven cable companies (Comcast, Charter, Cox, Altice, Mediacom, Atlantic Broadcast and Cable One); the DirecTV and Dish TV satellite services; phone company services Verizon Fios, AT&T U-verse and Frontier; and vMVPDs Sling TV and AT&T Now.
AT&T, the leading U.S. pay-TV provider, accounted for 79% of the quarter’s net losses — up from 30% of net losses in last year’s third quarter. The company had a net loss of about 1.37 million subscribers across its DirecTV, AT&T U-verse and AT&T Now pay-TV services, compared to a net loss of about 295,000 subscribers in Q3 2018.
DirecTV alone dropped an estimated 1.073 million, while U-verse and AT&T Now lost relatively small numbers: 104,000 and 195,000, respectively. (AT&T combines totals for DirecTV and U-verse under “premium TV,” so Leichtman estimates breakout numbers for those.)
The acceleration of AT&T’s paid-sub losses is “largely the result of [its] strategic decision to increasingly focus on retaining and acquiring more profitable subscribers,” notes Leichtman. (Not that AT&T is alone in pursuing that strategy, as we know.)
The pay-TV providers in the analysis now account for about 84.8 million subscribers. That includes 46.1 million video subscribers across the top seven cable companies, 26.3 million for the satellite TV services, 8.6 million for the top telephone companies, and 3.8 million for the top publicly reporting vMVPD services.
The two leading satellite TV services lost about 1.14 million subscribers in the quarter, up from a loss of about 725,000 in Q3 2018. For DirecTV, this was the sixth consecutive quarter of net losses. However, Dish TV saw fewer net losses than in any quarter since Q3 2014.
The top seven cable companies lost about 410,000 subscribers, up from a loss of about 245,000 subscribers in Q3 2018. The rundown of declines: Comcast, -238,000; Charter, -75,000; Cox, -40,000; Altice, -31,900; Mediacom, -18,000; Cable One, -10,430. The single exception: Atlantic Broadband saw a net gain of 5,294.
(Aside from the AT&T services noted above, Cox is the only other company in the report for which numbers are estimated.)
The top telephone providers lost about 210,000 video subscribers in 3Q 2019 – compared to a loss of about 80,000 subscribers in 3Q 2018
This analysis shows Sling TV’s gain of 214,000 more than offsetting AT&T Now’s 195,000 loss, for a net gain of about 20,000 in the virtual MVPD (vMVPD) subscategory.
However, as noted above, there's one key omission: Leichtman does not include Hulu + Live TV, YouTube TV, PlayStation Vue, or other vMVPDs that do not publicly report subscriber counts. And MoffettNathanson recently estimated that Hulu + Live TV gained 400,000 subscribers in Q3, for a total of 2.7 million — to edge past Sling TV (with a Q3 total of 2.69 million) for the first time.
Kagan Puts MVPD Sub Losses at 1.9M
Very much echoing the same trends, Kagan reports that traditional multichannel subscriber losses “ballooned” to 1.9 million in Q3 — up by a full 25% from Q2, which itself set a record for losses.
Combined traditional video subscriptions for cable, telco and direct-broadcast-satellite (DBS) finished the quarter at an estimated 85.1 million, down more than 5.8 million in the trailing 12 months, at a 6.4% year-over-year pace.
vMVPD gains helped reduce the overall loss of households subscribing to a package of live linear networks, adding 368,000 customers and reducing the combined traditional and virtual category losses to 1.5 million.
When the nearly 8.5 million virtual multichannel subs are included, Q3 subscriptions totaled nearly 93.6 million subscriptions.
Kagan estimates that penetrations of combined residential services dropped to under 72% of the 126.3 million occupied households in the quarter.
Cable operators lost a combined 487,000 traditional multichannel customers, posting declines of 1% for the quarter and on track for a 3.1% annual decline.
The telco video segment experienced its worst performance of the year, losing 192,000 subscribers, for a loss of 1.9% in the quarter and a 5.6% annual decline.
Satellite losses “weighed heavily on the market,” notes Kagan, with combined losses that “swelled” to 1.2 million, fueling a 4.4% quarterly decline and a 12.3% annual decline.
Meanwhile, On the Alternate Front…
Pay TV subscribers will continue to outnumber cord-cutters for some time, of course.
EMarketer’s latest estimates project that the number of U.S. pay-TV households will decline from 86.5 million to 72.7 million between 2019 and 2023, and that U.S cord-cutter and cord-never households will reach 56.1 million by 2023.
According to Nielsen’s latest Local Watch Report, more than two-thirds of U.S. households are now enabled to stream video content, either via an internet-connected device or a smart TV
-- 13 times the penetration of just two years ago.
Nielsen also estimates that 56% of U.S. adults are streamers. Still, 77% of streamers currently have access to broadcast stations and cable networks via traditional cable providers or vMVPDs, 82% of adult streamers watch linear broadcast stations, and nearly 90% watch linear cable networks.