The US pay-TV industry took it on the chin again in the second quarter of 2024 as service providers lost another 1.62 million subscribers, dropping its grand total to an all-time low of 68.76 million.

Meanwhile, the outlook for the pay-TV market got worse over the weekend as ABC, ESPN and other Disney-owned channels went dark on DirecTV after the two sides failed to reach a new carriage agreement.

While the full US pay-TV industry, including virtual multichannel video programming distributors (vMVPDs), shed fewer customers in Q2 2024 than it did in the year-ago quarter, it still lost a "mindboggling" 4 million subscribers in the first six months of the year, according to MoffettNathanson's Q2 "Cord-Cutting Monitor" report (registration required).

Second quarter results left pay-TV subscribers declining at a rate of 6.9%, slightly worse than the -6.8% in the year-ago quarter, the report found. When vMVPDs are removed from the picture, the rate of decline among "traditional" pay-TV providers (cable, satellite and telco) was -12.6%, worse than -11.3% a year earlier.

"This marks the tenth consecutive quarter of double-digit declines," noted MoffettNathanson analyst Craig Moffett.

Those traditional pay-TV providers lost 1.67 million subs in Q2, slightly better than a loss of 1.72 million subs in the year-ago quarter. Among that group, US cable lost 1.03 million in the quarter, compared to -495,000 for satellite (DirecTV and EchoStar/Dish) and -144,000 for the telcos.

vMVPDs (YouTube TV, Fubo, Sling TV, etc.) added 49,000 subs in Q2, improving on a year-ago loss of 6,000 subs, extending the category's total to 19 million. The vMVPD "conversion rate" (the rate at which traditional video sub losses are re-captured by vMVPDs) was just 29.2%.

The full pay-TV industry Q2 ended with 68.76 million subscribers, down from 73.83 million a year earlier.

Disney-DirecTV blackout

The pay-TV outlook got a bit gloomier over the weekend as Disney's stable of channels, including ESPN and ABC, went dark on DirecTV just days before the start of the NFL regular season. DirecTV, which was spun off from AT&T in 2021, includes the DirecTV satellite TV service, DirecTV Stream and U-verse (the managed IPTV service that formerly was with AT&T).

The impasse has apparent linkages to Venu Sports, the sports programming joint venture of Disney, Fox and Warner Bros. Discovery that was just slapped with a temporary injunction on antitrust concerns. The JV is still facing an antitrust lawsuit filed by Fubo, a sports-focused vMVPD.

Robert Thun, DirecTV's chief content officer, filed a declaration of support in April that favored Fubo's motion for a preliminary injunction against the JV. Thune argued that DirecTV and other pay-TV distributors have so far been unable to offer a sports-focused channel package that the JV was proposing. DirecTV essentially wants that option too.

"DirecTV has grave concerns about the effect that the sports content joint venture between defendants in this case will have on competition for the distribution of sports programming," Thun wrote at the time.

In a press release pertaining to its current carriage dispute with Disney, DirecTV claimed that Disney "demanded that to reach any licensing agreement or to extend access to its programming, DirecTV must agree to waive all claims that Disney's behavior is anti-competitive."

DirecTV is also upset that some of Disney's best programming, such as "The Bear" and "Only Murders in the Building," are exclusive to Hulu, the Disney-owned streaming service, while the first run of the new "Shogun" series is on Hulu rather than pay-TV.

In a statement issued to multiple media outlets, Disney said it is "open to offering DirecTV flexibility and terms which we've extended to other distributors," but "will not enter into an agreement that undervalues our portfolio of television channels and programs."

"To state the obvious, the stalemate between DirecTV and Disney is now about much more than just what price DirecTV will pay for ESPN," Moffett wrote.

The analyst also feels a successful launch of the Venu JV "could have spelled the death blow to the traditional Pay TV bundle: a final decoupling of sports from the long tail."

The Disney-DirecTV impasse surfaces about a year after Charter Communications and Disney struck a new carriage deal following a brief blackout. Charter's new deal with Disney gives the cable operator clearance to bundle in the ad-supported Disney+ service to most pay-TV subs and ESPN+ to customers on Charter's sports-focused package.