If you thought cord-cutting was a problem for MVPDs prior to mid-March, when the COVID-19 pandemic brought its global assault to U.S. shores, you ain’t seen nothin’ yet.
That’s the gist of a new report from Michael Nathanson of Wall Street advisory house MoffettNathanson, which shines a light on just how distressing the fall-off in cable TV subscribers presently looks.
“In the context of over 30 million unemployment claims and estimates for a 40% GDP decline, it would be unseemly to resort to hyperbole to describe the carnage in Pay TV in Q1,” Nathanson writes in a freshly distributed investor note. “Better that we simply
report the numbers.”
Traditional Pay TV subscriptions fell by a record 1.8 million in Q1 2020.
It marks the the worst quarterly result on record, and brings the annual rate of decline to 7.6%, also a record.
Things were “particularly bad” for satellite TV, where subscriptions plunged by over 1 million for the third quarter in a row. This brings the annual rate of decline to a worst-ever 14.3% — sort of, Nathanson explains. “The number would be worse still if we were to include lost bars, restaurants, and hotels temporarily suspended at Dish Network.”
For traditional MVPDs, “Cable’s decline of 600,000 subscribers in the quarter, for annual growth of negative 4%, looks positively gentle by comparison.”
But it, too, was the worst on record, Nathanson notes.
In fact, the retraction in cable homes is so significant, one may want to reach for their cassette player and fire up Jagged Little Pill: at 63% of occupied households, traditional Pay TV penetration has reached a level not previously seen since roughly 1995, Nathanson finds.
While the cassette player is out, grabbing Def Leppard’s Hysteria may be a worthy choice.
“There are now as many non-subscribing households (46 million) as there were Pay TV subscribers in 1988,” Nathanson says.
There’s no relief coming for MVPDs and DBS providers anytime soon.
“With sports off the air, and with the pain of the tsunami of unemployment just beginning to hit as the quarter ended, all these numbers will get worse in Q2,” Nathanson says.
While those facts are distressing, Nathanson has news that may be even more devastating: Where did those customers go?
“The vMVPDs, once viewed as the last line of defense for cable networks, imploded in Q1,” Nathanson says.
In fact, the vMVPD category lost roughly 341,000 subscribers in Q1.
This impacts not only AT&T TV Now and Sling TV but also the now-defunct PlayStation Vue service, as well as fuboTV.
“Disney’s Hulu Live TV appears to have hit a wall in the wake of multiple price increases,” Nathanson adds, experiencing “an abrupt deceleration from their recent torrid growth.”
Even YouTube TV, by far the fastest growing of the lot, couldn’t pick up all the slack, Nathanson laments.
For Comcast and The Walt Disney Co., acting to bring to fruition OTT offerings is now a comfort of sorts for Nathanson. With direct-to-consumer “lifeboats” gaining traction at a fast pace, and HBO Max from AT&T ready for launch, “it is increasingly clear that as consumers climb into these lifeboats, they are leaving the (sinking) motherships behind.”
Nathanson concludes, “Notwithstanding the princely valuations being accorded SVOD platforms like Disney+, we doubt the DTC lifeboats will ever come close to matching the profitability of the business they are ostensibly designed to replace.”
