Illustrating the rising rate of cord-cutting, the percentage of US streamers that don't have a pay-TV subscription reached a new high in the second quarter of 2022, according to MoffettNathanson.

In its latest quarterly SVOD Tracker (registration required), which looks at subscription video on demand, MoffettNathanson found that the percentage of streamers without pay-TV rose to 40% in Q2 2022, up from 28% in the year-ago quarter. The research is based on the firm's analysis of a HarrisX survey of 21,798 respondents conducted between April and June 2022.

Figure 1: Click here for a larger version of this image.
(Source: HarrisX, MoffettNathanson analysis. Used with permission.)

By comparison, the percentage of streamers with paid TV reached 41% in Q2 2022, down from 47% in the year-ago period.

High cost remains the top reason consumers gave for cutting the pay-TV cord and leaning more heavily on direct-to-consumer (DTC) services, the study found. But that rationale is becoming slightly less important as the next driver on the list – that the shows consumers currently watch are available on streaming services – becomes more pronounced.

At a higher level, streaming penetration in the US remains on the rise, hitting a record 81% in the period, up from 75% in the year-ago quarter, the study found.

Netflix, Amazon Prime Video fading as 'must-haves'

The study also shed some light on how streamers view specific subscription services. Two streaming juggernauts – Netflix and Amazon Prime Video – saw their respective penetrations drop slightly in the quarter, alongside small gains by Disney's Hulu and Disney+ SVoD offerings.

As legacy media companies claw back premium content for use in their own streaming services, "first mover platforms like Netflix have lost their 'bullet-proof/must-have' status in the minds of consumers and investors," MoffettNathanson analyst Michael Nathanson noted in the report.

Among other premium DTC streaming services, NBCUniversal's Peacock saw subscriber growth cool to 40 basis points (bps), while growth at Discovery+ stalled and growth for Apple TV+ was relatively flat on a quarter-over-quarter basis. Paramount+ was solid, growing 120 bps quarter-over-quarter.

The study found that the bundling of individual streaming services has served Disney well, with the share of Disney+ subs also using Hulu's SVoD service jumping by 200 bps, to 63%. Meanwhile, sub overlap between HBO Max and Discovery+ remained flat in the wake of the merger of WarnerMedia and Discovery and the creation of Warner Bros. Discovery (WBD). However, the analysts are keeping an eye out for details about how HBO Max and Discovery+ will be combined into one platform.

Though it's still playing catch-up from a subscriber standpoint, Discovery+ does well with daily engagement. The study found that the WBD-owned service notched 33% daily usage, only behind Netflix (39%) and Hulu (38%). Peacock, at 20% daily usage, lagged behind Disney+ (28%), HBO Max and Paramount+ (27% each), and Amazon Prime Video (23%).

Shifting to payments and password sharing, Netflix was at the top at 16% when consumers were asked if someone outside the household paid for the service. That was followed closely by HBO Max and Disney+ at 15%, Paramount+ and Discovery+ at 11%, Apple TV+ and Amazon Prime Video at 7%, and Peacock at 4%.

At 35%, Apple TV+ led the way with respect to access that's part of a promotional package. But that number has been dropping rapidly, "a good sign that more users have a willingness to pay," Nathanson wrote.

More rough waters ahead for Netflix

MoffettNathanson's report highlighted Netflix, which is set to post Q2 2022 results on Tuesday (July 19) afternoon. Following Netflix's loss of 200,000 subs in Q1, the analysts expect the company to lose 2 million global subs in Q2. As a result, they are lowering their Q2 2022 revenue estimate for Netflix by $90 million ($7.95 billion) and EBIT (earnings before interest and taxes) forecast by -4% ($1.66 billion).

MoffettNathanson doesn't see much relief coming to Netflix in the back half of 2022, noting that it believes the company has reached subscriber maturity in its current, most valuable US, Canada and western European products.

"We now expect greater pressure on subscriber growth in the back half of the year, and as such we lower our 3Q and 4Q paid net addition forecasts by -1.0 million each, now forecasting Netflix to finish the year with 231.6 million global paid subscribers (vs. 233.6 million prev.)," Nathanson explained.

MoffettNathanson, which has a "market perform" rating on Netflix shares, cut its price target on the stock by -$35, to $210. The analysts said they'll hold off updating their model for Netflix's coming ad-supported offerings and its new ad-tech partnership with Microsoft until more details on pricing become known.

Related posts:

— Jeff Baumgartner, Senior Editor, Light Reading