Major pay-TV operators made it through another quarter without any substantial acceleration in cord-cutting, according to industry data tallied by analysts MoffettNathanson. In Q2 ’16, pay-TV operators lost an estimated 757K subscribers, compared with a loss of 683K subscribers in Q2 ’15. Note also that the second quarter is always the seasonally weakest. When estimated Sling TV subscribers are added in, the loss declines to 708K in Q2 ’16 vs. 613K lost in Q2 ’15.
In a continuing trend, cable operators again picked up market share at the expense of telcos and satellite providers. Cable’s loss in Q2 ’16 declined to 242K subscribers from 404K lost in Q2 ’15, while telcos swung from a gain of 5K subscribers in Q2 ’15 to a loss of 526K subscribers in Q2 ’15. AT&T accounted for the vast majority of that loss (minus 391K) as it transitioned U-Verse subscribers to DirecTV. Verizon had a loss 41K vs. a gain of 26K a year earlier as it experienced an employee work stoppage.
Meanwhile Dish lost 330K in Q2 ’16, double its loss a year earlier. Dish is attempting to shore up its satellite losses with Sling TV, but MoffettNathanson estimates that Sling TV additions actually declined to 49K in Q2 ’16 vs. 70K in Q2 ’15. DirecTV gained 342K vs. a loss of 133K in Q2 ’15, again due to the shifting of AT&T subscribers.
MoffettNathanson noted that the rising prevalence of skinny bundles, both from new providers and existing ones, has led to the murkiness in understanding why cable TV networks like ESPN, Discovery and Time Warner have all reported losing significant subscribers in Q2 vs. overall cord-cutting trends. There were no big skinny bundle launches in Q2, so it’s not clear exactly how the numbers are playing out yet, except that with publicly-traded pay-TV operators reporting actual video subscriber counts, it is possible to track the industry’s overall performance.
The biggest recent skinny bundle announcement is from Hulu, but it remains far from clear what impact it will eventually have. I’m skeptical that it will have much impact given its cost of programming will be quite high with all the cable networks that will likely be packed in, pressuring the retail rate to be relatively high to preserve margins. MoffettNathanson also notes that Hulu’s industry owners are likely to be conservative with Hulu’s skinny bundle and not price it too low - which would spur early growth - instead opting to price higher to protect their existing business model with pay-TV operators.
Topics: MoffettNathanson LLC