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9 May 2019

US pay TV losses approach 4 million a year – 70% at AT&T, Dish

An irrecoverable flow of cord cutters wreaked havoc on the US pay TV industry in Q1, with much written about the record figures across cable, satellite and vMVPD services, and it was the same old story of glossing over the bigger picture.

The top six US operators recorded video losses of more than 1.2 million between them for the first quarter of 2019, which for the year to date period cumulatively comes to over 3.7 million losses – a total hemorrhaging which AT&T and Dish Network accounted for more than 70%. Indeed, the key differentiator is that both these satellite TV operators run separate vMVPD services, with DirecTV Now and Sling TV, which are bundled into figures along with satellite TV subs. So, the trend is clear – the more video a tier 1 operator offers, the worse the bleeding. But is it really that clear cut?

Of course, losses incurred across DirecTV Now were a direct result of price hikes, as company executives have openly conceded on earnings calls. Sling TV, meanwhile, made a slight recovery with 7,000 net additions in Q1, meaning the real damage to the Dish TV satellite business was actually 266,000 cord cutters. Yet clearly these vMVPDs are suffering from a more inherent trend. Any early promise the industry held for DirecTV Now and Sling TV a couple of years back has all but dissipated.

As shown in the table above, the total number of video subscribers across the top 6 US pay TV operators slipped under 80 million for the first time in the last quarter, and the odds are stacked heavily against these six companies in ever making a recovery.

Dish Network filed its Q1 2019 earnings release the day after Faultline Online Reporter went to press last week. With Dish TV now on 9.64 million subscribers and regularly clocking in a subscriber churn rate of over 200,000 a quarter (albeit a slowdown from 334,000 in Q2 2018 and 341,000 in Q3 2018), it looks more than feasible that Dish will slide under 9 million satellite TV subscribers by year end. Dish cited the removal of HBO from its service by AT&T as a chief mitigating factor.

Dish CEO Erik Carlson summarized the Sling TV situation as follows, “While the rest of the marketplace is in turmoil regarding pricing and position, we remain focused, focused on delivering a great experience, meaningful value, unique flexibility, and category-leading stability. Ad sales for Sling TV in the first quarter nearly doubled year-over-year, where we’ve enabled live dynamic ad insertion on more than 90 networks.

“We continue to see strong penetration of margin-rich add-ons like premium channels and our cloud DVR offering. With every move our competitors make, we become more differentiated, reaffirming our strategy of offering flexibility of the skinny bundle.”

Well, what choice does it have – at least AT&T has a WarnerMedia-fronted OTT offering on the way with promising potential for plugging the hole.

But AT&T again made video losses at rival operators appear trivial as it bled out 627,000 subscribers in Q1 2019 – incurring 544,000 on traditional pay TV with an additional dent of 83,000 for DirecTV Now.

Over at Charter, the cableco posted a poor quarter of TV losses, dropping by 152,000 subscribers in Q1 2019 to under 16 million for the first time since integrating the Bright House Networks and Time Warner Cable businesses (a combined 22 million at the end of 2015).

The latest spate of cord cutting makes it 327,000 net video subscriber losses for the year to date period, with the latest fatalities signaling a concerning escalation since the slowdown throughout last year – from 36,000 video sub losses in Q4 2018; 66,000 in Q3; 73,000 in Q2; and 122,000 in Q1.

The situation at Verizon was less severe, given its relatively small focus on video, ending the first quarter with 4.4 million Fios video connections, shedding 200,000 subscribers in the year period, compared to a loss of 184,000 between Q1 2017 and Q1 2018. Given the accelerated churn rate seen in Q1 2019, more than doubling from 22,000 to 53,000, Fios video abandoners look set to approach 250,000 a year very soon.

As a result, there are growing question marks about whether Verizon will even continue operating a video service in the near future, or hand over responsibility to a tried and tested third party to help sell 5G packages.

Comcast, meanwhile, continues to keep us on our toes. Not only is the cable behemoth transitioning some of its technologies and content over to Sky in Europe, there are strong signals about a sale of its 30% stake in Hulu to Disney looking increasingly likely.

But focusing on pay TV, Comcast closed out Q1 2019 with 400,000 fewer video subscribers than a year ago, with its domestic video subscriber base shrinking by 121,000 subs in the first quarter.

Like AT&T, Comcast has a new streaming service in the works with NBCUniversal, which data from Rethink TV projects to reach 4.8 million subscribers by 2024, less than 10% as much as Disney+ is projected to accumulate, which is why retaining a shareholding in Hulu could be crucial.

Last but not least, Altice USA closed out the end of March with total pay TV losses in the year to date period of 130,000, after taking a hit of 10,000 in the last quarter. The silver lining for Altice was that Q1 2019 represented a slowdown from the 30,000 losses reported in the previous year period, but still, the entire premise of this article is highlighting that accumulative pay TV losses across the board are catastrophic – and sugarcoating these with minimal quarter-on-quarter slowdowns when the year-on-year damage is through the roof isn’t going to fool us.