Where's the subscriber floor for US pay-TV?
Despite the presence of virtual multichannel video programming distributors (vMVPDs) such as YouTube TV and Sling TV, the overall US pay-TV subscriber base has continued to slide. But the vexing question for the industry is just how steep and how far that slide will go, and when will it finally reach the bottom of the hill?
A fresh report (registration required) from MoffettNathanson suggests that the slide still has quite a ways to go.
As for where things stand at the moment, MoffettNathanson notes the US pay-TV subscriber base (including vMVPDs) dropped to 84 million in Q3 2021, representing 69% of US TV households. That's down from 93 million pay-TV subs (again, including vMVPDs), or 78% of US TV households, at the end of Q3 2019.
MoffettNathanson projects a 4% to 5% annual decline in pay-TV subs, expecting the grand total to drop to 73 million by 2024. By then, the number of homes subscribing to traditional pay-TV will be roughly equal to the number of non-pay-TV households.
Sports and news households are pay-TV's 'bedrock floor'
But where's the bottom? To help determine that, the general belief is that sports- and news-viewing households are the most likely to stick with the pay-TV bundle.
With that in mind, MoffettNathanson, using fresh survey data from Altman Solon, estimates there are about 58 million sports viewing households taking the pay-TV bundle now. That represents "a potential floor for linear subscribers over time," Craig Moffett, analyst with MoffettNathanson, noted in the report.
But when considering regular sports viewers who also watch news, it creates an "even stickier cohort taking the pay-TV bundle, representing perhaps a stronger absolute floor at 53 million US households," Moffett noted. That group appears to "be the bedrock floor of the Pay TV world," he added.
Considering the base of 84 million US pay-TV subs at the end of Q3 2021, that potential floor suggests that there are roughly 31 million homes still at risk for further pay-TV erosion.
The DTC sports wild card
However, that still may not end up being the absolute floor for pay-TV, as there are other moving parts that could change it, including a gradual shift of select live sports coverage to direct-to-consumer (DTC) streaming services.
A couple of notables there include the new carriage of Sunday Night Football on NBCU's Peacock service and NFL CBS games on Paramount+, moves that could help to drive incremental reach and viewership outside the traditional linear TV ecosystem. According to Moffett, the number of sports viewers outside the pay-TV universe (including vMVPDs) has grown by about 7 million over the past two years, indicating that sports leagues have been able to secure incremental reach outside the traditional TV bundle.
"As such, we expect the leagues and media owners to become more aggressive in bringing sports to DTC platforms to broaden their reach beyond the Pay TV base," the analyst added.
Such moves would certainly alter the pay-TV dynamic, so sports rights holders with legacy pay-TV businesses to protect will need to proceed carefully.
"While we have long believed that live sports and news are the glue holding the Pay TV bundle together, we still question the strength of that adhesion," Moffett wrote. "Stepping back, while the finding that there are still over 30 million US homes at risk for further Pay TV erosion is deeply concerning, there is a case to be made that over-the-top streaming services that feature sports could be additive to the pie if built in a targeted and price-sensitive manner. However key rights holders must avoid leaking all their key rights over-the-top in order to avoid killing what is left of the golden goose."
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— Jeff Baumgartner, Senior Editor, Light Reading