Look for more traditional pay TV losses in 2020 as higher pricing and new lower-cost direct-to-consumer streaming platforms have major effects on the business, one media analyst says.
Jeffrey Wlodarczak, media analyst for Pivotal Research Group, estimates that 2020 will see total traditional pay TV losses --- cable, satellite and cable subscriptions of 6% or 6.7 million subscribers. Losses amounted to 6.3 million subscribers in 2019, also around 6%.
Total U.S. traditional pay TV subscribers for 2019 were estimated to be around 75 million (with virtual pay TV platforms at around 9 million). Wlodarczak says traditional pay TV will end of the year at a 64.6% penetration of U.S. TV homes.
In five years, he adds, the traditional pay U.S. penetration of cable, satellite and telco monthly packages is projected to sink to 42% as it takes on annual declines of around 4.8% through 2025.
Wlodarczak writes in a report:
“In order to maintain subscriber growth and reduce subscriber churn, our assumption is that traditional media companies that launch DTC [direct to consumer streaming platforms] players such as Disney and Comcast will increasingly push key content onto direct platforms and away from pay TV, further exacerbating pay TV losses.”
He adds: “This will likely be exacerbated by aggressive price hikes [by] distributors. Basically, the traditional pay TV product will get less and less compelling and more and more expensive.”
At the same time, he says, new D2C platforms' thin profit margins expectations and other weak financial metrics will be harder to maintain -- especially after new promotional deals around the initial launches of Disney+ and Apple TV+ come to an end.
Big premium platforms will be forced to make bundled deals for new subscribers with pay TV distributors, Wlodarczak says. Netflix already is a package with many traditional pay TV distributors' programming/network service plans.