As streaming video continues its ascendancy, cable, satellite and internet TV providers in the U.S. turned in their worst subscriber losses to date in the first quarter of 2023 — collectively shedding 2.3 million customers in the period, according to analyst estimates.
“We are watching the sun beginning to set” on the pay-TV business, SVB MoffettNathanson senior analyst Craig Moffett wrote in a report Friday.
With the Q1 decline, total pay-TV penetration of occupied U.S. households (including for internet services like YouTube TV and Hulu) dropped to 58.5% — its lowest point since 1992, two years before DirecTV launched as a new rival to cable TV, according to Moffett’s calculations. As of the end of Q1, U.S. pay-TV services had 75.5 million customers, down nearly 7% on an annual basis.
Cable TV operators’ rate of decline in Q1 reached -9.9% year over year, while satellite providers DirecTV and Dish Network fell -13.4%. In addition, so-called “virtual MVPDs” (multichannel video programming distributors) lost 264,000 customers in Q1, among the worst quarters to date for the segment.
“The picture is not one that suggests that a plateau in the rate of decline is coming any time soon,” Moffett wrote.
Comcast, the largest pay-TV provider in the country, dropped 614,000 video customers in Q1 — the most of any single company — to stand at 15.53 million at the end of the period. Asked about dwindling video business on the company’s earnings call, David Watson, president and CEO of Comcast Cable, acknowledged the reality of cord-cutting and said the operator’s approach is “to not subsidize unprofitable video relationships.” He added, “We’ll fight hard, whether it’s acquisition, base management or retention. So it’s important to us, but we have figured out a way to manage it financially.”
Google’s YouTube TV was the only provider tracked by MoffettNathanson that picked up subs in Q1, adding an estimated 300,000 subscribers in the period (to reach about 6.3 million) and netting 1.4 million subscribers over the past year. Hulu, meanwhile, has barely grown over the past three years (and loss about 100,000 live TV subs in Q1), Moffett noted, while FuboTV lost 160,000 subscribers in North America in the first quarter to mark its worst quarterly loss on record.
Pay TV is suffering from what Moffett calls “the impoverishment cycle,” in which higher sports-broadcast fees have driven retail prices higher — thereby fueling cord-cutting and forcing distributors to increase prices to compensate. Even ESPN, one-time stalwart of the traditional ecosystem, has conceded that there will be a day when a la carte streaming is a viable option, Moffett noted.
“We haven’t really changed our position regarding basically migrating ESPN’s flagship service as a direct-to-consumer or streaming platform,” Disney CEO Bob Iger said on the conglomerate’s May 10 earnings call. “We think there’s an inevitability to that, but it’s a huge decision for us to make. And we know that we’ve got to get it right, both in terms of pricing and timing.”
Is there a bottom in sight for the pay-TV industry? MoffettNathason has argued that the “pay TV floor” is between 50 million and 60 million U.S. homes. But, Moffett wrote in the latest report, “As things stand, we expect cord-cutting to grow even worse and the long-theorized ‘floor’ to be breached.”
