Pay-TV Market ‘Getting Uglier’ After Reported Q3 Losses

The loss of 1.74 million subscribers was worse than projected.
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NEW YORK—The story of the ugly duckling is not currently applicable to the pay-TV market based on recent numbers detailing the loss of subscribers—rather than turning into a beautiful swan, the pay-TV market is getting uglier and uglier.

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This is based on the third quarter 2019 report from MoffettNathanson on media earnings. Having described the second quarter of the year as “freaking ugly” at the time, the latest results have the analysts taking a deep dive into the dictionary to find a more accurate descriptor.

With the four video distributors that reported as part of MoffettNathanson’s research—AT&T, Charter, Comcast and Verizon—it was revealed that 1.74 million video subscribers left their services in the third quarter, more than 240,000 than was originally estimated. Of the four, AT&T saw the largest exodus, as the company reported that it lost 1.1 million premium video subscribers and an additional 200,000 for its AT&T TV Now service (formerly DirecTV Now). That represents 80% of the departing video subscribers.

As a result, the rate of traditional cord-cutting has hit a new low of -6.2% over the last year. Even the cushion of cord-cutting helping to build the virtual MVPD market has become less certain, with MoffettNathanson believing that price hikes for these services will keep them from stemming the bleeding as the overall cord-cutting rate has also reached a new low of -3.8%. Just 15 months ago that rate was under -1%, per MoffettNathanson.

For cable affiliate fees, this will all contribute to a growth of 3% in the third quarter, -300 basis points slower than the same period last year. That rate is expected to continue to decelerate in Q4.

Things aren’t looking to much better for advertising. With NBCU and Turner Networks reporting, the domestic national is in the negative for Q3. MoffettNathanson expects that to hold true when other companies report in the coming weeks.

“Since AT&T provided initial guidance of massive subscriber losses in early September, media investors have been bracing for an even uglier quarter than 2Q, which we labelled “freaking ugly,” MoffettNathanson wrote in its report. “Well, with earnings now in the books for Comcast, AT&T, Verizon and Charter, we can definitively say that the early read on traditional cord-cutting is uglier than ever before.”