As cord-cutting reaches a "tipping point" in 2020, nearly half of the US pay-TV market remains "at risk," according to a new report from MoffettNathanson.
Noting that sports viewers remain the "most entrenched" pay-TV subs, some 60% of the US base represents the potential floor for the pay-TV ecosystem, so long as sports league rights remain exclusive to the traditional pay-TV bundle, Craig Moffett, analyst with MoffettNathanson, explained in a report summing up takeaways from the firm's annual "Cord-Cutting Summit" held on November 20. "That leaves 40% of today's Pay TV universe at risk," he adds.
While sports is the glue that's holding together the bundle, sports-related costs are driving up the price of pay-TV bundles. That, Moffett noted, is applying more pressure not only on the traditional multichannel programming distributor (MVPD) model but the models of "virtual" MVPD services that are supposed to help offset subscribers lost to cord-cutting.
Those rising costs "will drive sustained cord-cutting," the analyst predicted. "The video market is in full disruption and this year could be the cord-cutting tipping point."
That scenario is being fueled by cable operators like Comcast focusing more heavily on the most profitable pay-TV subs and simply letting others go to OTT sources without much of a fight or targeting broadband-only subs with video streaming offerings like Xfinity Flex. That's likewise creating a bifurcation in the market -- while many subs remain happy with the existing pay-TV bundle, there's a growing group of customers that are more price-oriented, Moffett explained.
Still, the analyst is not ready to declare that 2020 will witness a massive acceleration in the rate of cord-cutting -- the situation still needs to play out. AT&T sustained heavy pay-TV sub losses so far in 2019, but expects those losses to level out a bit toward the middle of 2020. But it's not clear yet if US cable's increased focus on profitable video subs will lead to a spike in pay-TV subscriber losses, Moffett noted.
Moffett also noted that discussions at the Summit centered on which virtual MVPDs will remain standing following an expected shakeout driven by the need to raise prices to counter surging programming costs. Sony PlayStation Vue is already making plans to shut down on January 20, 2020, and AT&T TV Now (a rebrand of the DirecTV Now skinny-bundle OTT-TV service) "is essentially exiting the business," he added.
"If Sling decides to follow AT&T's path and moves away from the business, fuboTV could be the third major platform left standing (alongside YouTube TV and Hulu)," Moffett wrote. Philo, a sports-free, entertainment-focused OTT-TV service "has been growing quickly as a complementary product to SVOD and we expect it would get a big boost if it can arrange a partnership with an antenna company."
- US Pay-TV Loses Another 1.2M Subs in Q3
- PlayStation Vue to Shut Down
- CEO McCollum: SVoD Surge Could Be Boon for Philo
- Another Cable Operator Gives Pay-TV the Heave-Ho
- Comcast offers 'Xfinity Flex' for free to broadband-only subs
— Jeff Baumgartner, Senior Editor, Light Reading