Tough Q3 for pay TV

Nov. 13, 2018
The third quarter of 2018 was a tough one for U.S. pay TV operators, with steep subscriber losses across every segment except online video ...

The third quarter of 2018 was a tough one for U.S. pay TV operators, with steep subscriber losses across every segment except online video providers - and even there, growth is slowing - according to reports from the Leichtman Research Group and Kagan, a media research group within S&P Global Market Intelligence.

According to LRG, the largest U.S. pay TV providers - representing about 95% of the market - lost about 975,000 net video subscribers in 3Q 2018, compared to a pro forma loss of about 410,000 subscribers in 3Q 2017.

The top pay TV providers now account for about 90.3 million subscribers, with the top six cable companies having 47.1 million video subscribers, satellite TV services 29.9 million, telcos 9.1 million, and Internet-delivered (vMVPD) pay TV services 4.2 million subscribers.

Among LRG's findings:

  • Satellite TV services lost about 725,000 subscribers in 3Q 2018, compared to a loss of about 470,000 subscribers in 3Q 2017. DBS net losses were more than in any previous quarter. Net losses for DirecTV were more than in any previous quarter.
  • The top six cable companies lost about 245,000 video subscribers in 3Q 2018, compared to a loss of about 290,000 subscribers in 3Q 2017.
  • Telcos lost about 80,000 video subscribers in 3Q 2018, compared to a loss of 180,000 subscribers in 3Q 2017.
  • Internet-delivered services Sling TV and DirecTV NOW added 75,000 subscribers in 3Q 2018, compared to about 530,000 net adds in 3Q 2017. Net vMVPD adds in 3Q 2018 were fewer than in any quarter since their debut.
  • Traditional pay TV services (not including vMVPD) lost about 1,050,000 subscribers in 3Q 2018, compared to a loss of about 940,000 in 3Q 2017.

"Overall, the top pay TV providers lost about 975,000 subscribers in 3Q 2018. This marked the most net losses ever in a quarter for the pay TV industry," said Bruce Leichtman, president and principal analyst for LRG. "Satellite TV services had more combined net losses in 3Q 2018 than in any previous quarter. These net losses were largely driven by corporate strategies focused on acquiring and retaining more profitable subscribers (as well as a programming carriage issue between DISH and Univision). A related emphasis on improving the profitability of the satellite TV company's Internet-delivered flanker brands reduced net quarterly adds in the segment, resulting in vMVPDs not helping to mitigate overall pay TV losses to the degree they had in recent quarters."

According to Kagan, accelerating losses from satellite providers and weakening net adds from Sling TV, DirecTV Now and other vMVPDs drove the overall decline.

Combined, the cable, direct broadcast satellite (DBS) and telco multichannel sectors lost 1.2 million video subscribers in the three-month period ended Sept. 30, ending the quarter at 91.0 million, including 88.2 million residential customers.

Kagan's quarterly analysis now includes total virtual multichannel subscriptions from services such as Sling TV, DirecTV Now, Hulu with Live TV, YouTube TV and PlayStation Vue. The combined virtual platforms gained an estimated 2.1 million subs in the trailing 9 months, compared a decline of 2.8 million in the traditional segment.

Other findings from Kagan indicate:

  • The residential penetration rate stood at 76.2% as of Sept. 30 when including traditional multichannel and the estimated virtual multichannel universe.
  • DBS had its worst quarter on record with a loss of 726,000 subscribers.
  • Cable operators lost nearly 1.1 million subscribers year-to-date as of Sept. 30, their worst performance at the three-quarter mark since 2014.
  • Traditional telco subscriptions fell by 94,000. By itself, Verizon shed a net 63,000 subs.
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