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October 31, 2019
This Halloween, few things are as frightful as the state of the US pay-TV market.
Driven by cord-cutting, rising prices and increased consumer adoption of subscription VoD services, the condition of US pay-TV hasn't been just bad, it's been scary bad.
Or, in the view of research firm and industry watcher MoffettNathanson, calling the state of US pay-TV "freaking ugly" might be an understatement. MoffettNathanson applied that label after the Q2 2019 numbers rolled in. But, in a new report issued this week, the analyst firm admits it "will need to find a new phrase that is even more negative to describe third quarter trends."
Those trends are not just going down; they're slipping faster than expected. More financial results are to come, but four major US pay-TV providers -- AT&T, Comcast, Verizon and Charter Communications -- have already combined to report Q3 video sub losses of 1.74 million, more than 240,000 subs worse than MoffettNathanson expected.
"As such, the rate of traditional cord-cutting has reached a new low with a trailing twelve month run rate of -6.2%," Michael Nathanson, analyst with MoffettNathanson, explained in the report.
Figure 1: US Pay-TV Charts a Bad Course Source: Company reports, MoffettNathanson estimates and analysis.
And, once again, virtual multichannel video programming distributors (vMVPDs) -- a group that includes PlayStation Vue, a service that will be shut down in early 2020 -- aren't stemming the bleeding.
"Even if Hulu Live TV and YouTube TV crush expectations this quarter, we still expect to see dramatic continued acceleration in the rate of Pay TV subscriber declines," Nathanson wrote.
That broader scenario has caused Nathanson to assume that the overall rate of cord-cutting has accelerated to a new low (or high, depending on your point of view) of -3.8%. That rate, he adds, was just under -1% a mere 15 months ago.
The bulk of the blame in Q3 so far falls to the feet of AT&T, which lost 1.1 million "premium" video subs (DirecTV satellite and U-verse IPTV), and 200,000 AT&T TV Now (formerly DirecTV Now) OTT-TV customers. Although AT&T expects Q3 2019 to represent the peak of those losses, it's notable that its new OTT-delivered, bigger-bundle pay-TV service, AT&T TV, will be playing second fiddle to HBO Max, a subscription VoD service that will launch next May.
That decline is also having an unsurprisingly negative impact on TV ratings and advertising. "C3" primetime ratings (the three-day viewing window of a TV show's initial live showing or playback on a DVR or VoD) among the 18-49 age group for broadcast and cable channels are down 14%, Nathanson said, citing a mix of its estimates and Nielsen numbers. He also expects national TV advertising to fall 1.5% in Q3 2019 versus the prior year period.
If you're looking for a ray of hope, here's one to squint at: Nathanson points out that consumers who do watch linear TV are doing so in longer bursts, as the average "length of tune" among consumers 18 years or higher has grown 15% -- from 26.7 minutes to 30.8 minutes -- from Q3 2014 to Q3 2019.
But that represents a mere drop of positivity plunked into a sea of negativity that seems to be consuming the broader US pay-TV market.
— Jeff Baumgartner, Senior Editor, Light Reading
Senior Editor, Light Reading
Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.
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