It’s too soon to know whether 2019 will be remembered as the turning point year for the pay-TV industry - when all of the negative trends coalesced into a perfect storm that permanently diminished the industry’s place in American homes. But I’d say the odds are likely that 10-20 years from now, 2019 will likely be the top candidate for “turning point year.”
For evidence, consider new data from Leichtman Research Group, finding that major pay-TV providers which account for 95% of the market, lost 4.9 million subscribers in 2019. If 100% of providers had been counted, the losses would have been 5 million or more.
So about 5.5% of pay-TV subscribers cut the cord during the course of the year, over 3 times 2018’s rate of 1.7%. The top providers ended 2019 with around 86.2 subscribers (including an estimated 6.7 million virtual MVPD subscribers from Hulu, Sling and AT&T TV Now). At the end of 2017, the top providers had 92.2 million subscribers (including 3.4 million virtual subscribers) So that means in the past 2 years, traditional multichannel pay-TV subscriptions have dropped by 9.3 million, from 88.8 million to 79.5 million, a 10.5% decline.
But as I wrote in late January, just one company - AT&T - has an outsized impact on these cord-cutting trends. In 2019 AT&T lost a combined 4.1 million plus subscribers (nearly 3.5 million for its traditional services DirecTV and U-Verse, plus 665K for DirecTV Now which was renamed AT&T TV Now). AT&T has been all over the board with its video subscriber strategy, and just yesterday officially launched AT&T TV, which is meant to be a replacement service for DirecTV (but without the satellite dish).
AT&T TV enters a crowded market for linear TV service that it already in significant decline. The lowest priced AT&T TV “Entertainment” plan is $50/month. But it requires an onerous 24 month agreement and the monthly price will increase in the second year of the contract. There are also additional fees for regional sports networks and additional devices. All of this compares unfavorably to YouTube TV, Hulu with Live TV and other virtual MVPDs.
So AT&T is likely to remain the sick man of the pay-TV industry. The macro trends driving viewer behavior are only going to intensify in 2020: The proliferation of premium content available on AVOD/SVOD/hybrid terms - with those terms becoming even more generous to viewers. The rise in connected TV adoption and usage. The improvement in monetization of CTV-viewed programming due to better targeting/interactivity. The drop in linear viewing. The list goes on.
2019 was a miserable year for pay-TV, as the full force of the Internet’s disruptive power was on display. There is no end in sight to this disruption. Odds are cord-cutting will be even greater in 2020.