Cord-Cutting Gets Ugly: U.S. Pay-TV Sector Drops 566,000 Customers in Q2

Digital Cord Cutting

Cord-cutting headaches for pay TV have now progressed beyond just a dull, throbbing pain.

Cable, satellite and telco TV companies suffered their worst-ever quarterly subscriber declines for the three months ended June 30, collectively shedding more than half a million accounts — an accelerating erosion that’s put new pressure on operators and media companies exposed in the pay-TV biz.

No. 1 satcaster DirecTV, now part of AT&T, disclosed in a 10-Q filing Friday that it lost a net 133,000 U.S. subscribers in Q2, dramatically worse than its decline of 34,000 in the year-earlier period. Overall, traditional pay-TV distributors lost a whopping 566,000 video subs in the quarter, compared with 321,000 in Q2 2014, according to MoffettNathanson estimates.

Historically, Q2 has always been the softest for cable and satellite TV ops. But what should concern the industry is that the number of pay-TV households is now shrinking at an annual rate of 0.7%, compared with 0.1% a year ago, says analyst Craig Moffett. “That may not seem like a mass exodus,” he wrote in a research note, “but it is a big change in a short period of time.” Moreover, the declines come as U.S. household formation has picked up, Moffett noted, meaning pay-TV penetration rates are falling even faster.

The upswing in cable and satellite TV sub losses in Q2, along with Disney’s lowering guidance on affiliate-fee increases, led to a monumental sell-off in media stocks this past week. Shares of Disney, Viacom, Time Warner, 21st Century Fox and other congloms exposed to pay TV plummeted, with the sector losing some $60 billion in value in two days, before the stocks mostly stabilized Friday.

“There is clear and convincing evidence that consumers are increasingly cutting the cord or shaving the cord,” BTIG Research analyst Rich Greenfield wrote in a blog post Friday. “In turn, some of the executive commentary makes you wonder how disconnected from reality they are.”

On Friday, Cablevision Systems CEO James Dolan downplayed cord-cutting fears, after the New York-area MSO reported a relatively light loss of 16,000 video subs (versus 28,000 in Q2 2014).

“I don’t think the sky is falling quite yet, and I think that there is not enough programming weight yet in the Internet and in the over-the-top services that are out there to really entice a mainstream video customer,” Dolan said on Cablevision’s earnings call.

Dolan does not expect to see “a landslide of consumers” dropping pay TV in favor of OTT, he added: “My own prediction is that it will be at least five years for 10% of the market to move, and 10 years for 30% of the market to move.”

But Greenfield wonders if pay-TV execs fully appreciate how quickly consumer behavior is shifting, and whether incumbents are prepared to weather the storm. “The consumer must come first, not the business model, or MVPDs and their programming partners will undoubtedly suffer,” he wrote. “MVPDs likely need to accept that they will become ‘dumb pipes’ as consumers spend less time with traditional video (TV) content.”

One thing seems certain: The hemorrhaging in the pay-TV business is going to get worse before it bottoms out.

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  1. Chris says:

    I don’t need 400 choices to scroll though every day and I don’t want to pay 10% of my social security check to watch. It’s my husband’s only entertainment but I resent the cost!

  2. James Carver says:

    I cut the cord 4 months ago I bought a clearstream 2 v antennna from walmart I live 60 miles from Atlanta I pick up all the networks except NBC and there sub carriers crystal clear in hd and best of all its free and I get netflix for everything else all I pay is 8.99 a month for tv I’ll never go back to cable

  3. Ron says:

    It would be interesting to add the customers who downgraded their service. We were going to cancel Verizon TV completely until they offered he $12/month basic package. When we can get the NBC,FOX,ABC, and other news shows in real time ee will have no need for cable TV services.

    • Ryan says:

      You should be able to get all of the networks and a smattering of other content completely free by just hooking an antenna up to your tv.

  4. CoachTMBSC says:

    I was blowing almost $200 per month to Time-Warner Cable and have been for over 12 years. Almost $30,000 in that period of time. For the past several years I’ve stacked NetFlix and Hulu on top of that entertainment package as well. We found that we were watching more streamed content than cable content and when TWC wouldn’t give me a $5.80 credit for their one day of outage, I walked . It’s not the cost or the content driving the customers away, it’s the truly bad customer service nailing the lid on the coffin.

    Now we’ve found that there’s nothing (including sports) on cableTV that we can’t watch streamed for considerably less money and none of the terrible customer service from Time Warner Cable. An HD antenna, Roku box, Chromecast, and a better ISP plus Netflix and SlingTV and I have everything I watched on cable for well less than half of the cable bill and none of their cheap, broken, antique equipment cluttering up my system.

  5. Peter says:

    Yeah buddy, and I’m one of those lost Q2 customers, even though I’m in an area with no antenna reception. Streaming options are so much better and cheaper than cable that it was easy to sever my relationship with Comcast. On the very day I cut the cord I got my automated bill from Comcast — they had raised the rates for my bundle by another $40 a month, unannounced. That’s more than I pay for all my streaming entertainment.

  6. Greg Smith says:

    This will only accelerate, liberals are sick and tired of being forced to subsidize the stupidity on FOX ‘News’ who receive almost $1.7 billion dollars a year in carriage charges from folks who do NOT watch the channel. Cut your cable connection, it is the patriotic thing to do . . . .

    • Brian Johnson says:

      Conservatives are also tired of paying for the stupidity of MSNBC, ABC, CBS, CNN, PBS and the elite Hollywood crowd.

  7. Tiffany on the Lake says:

    I stopped suckling the cable teat nearly a year ago. These cable companies better pay attention to the evolving world or they’ll end up obsolete. Have they not learned from the ignorance of Blockbuster and Blackberry (once the #1 “smartphone”…we all had one)? I’m now paying $70/mo for Internet, Netflix, Hulu, and Amazon -vs- $160/mo for Cable and Internet. And don’t forget $30/yr for Magic Jack -vs- $30/mo for landline. #cheapaf

  8. Dave Berry says:

    It seems that Dolan and the other pay-TV CEOs are falling into the “defender” trap (just finished reading “Innovation: The Attackers Advantage”… great book. I highly recommend for those execs and other key players in the media industry). That is, they seem to be unaware of the real scope and potential of digital. Where did he get those numbers, 10% and 30%? In such a complex industry, it’s a risky to assume such metrics.

  9. Sandy says:

    Todd, really? This is a really racist and offensive picture. Variety really condones this? Unbelievable.

    • Jedi77 says:

      Someone needs to get a life…

      A noose is by itself not racist.
      Is using a noose in a movie racist?
      Was The Dirty Dozen racist?
      Is Alice Cooper racist when he uses it on stage?

      Or are you just very easily offended?

    • Eggplant says:

      This kind of nonsense is getting really tiresome. You looked at this article, squinted really hard, turned your head sideways, and said “now how can I pretend to take offense to something in this article in order to demonstrate my moral superiority? Ohh, I know… I’ll say the nooses are racist, even though this article has nothing to do with race and no reasonable person would even consider that.”

      No. Stop pretending to be offended. This isn’t racist in the least, and you know it. Legitimate issues like racism do not exist to fuel your narcissistic ego. Just stop it.

    • Tumbler says:

      You have serious issues, dude.

  10. Rob says:

    I’m ready to pay Comcast their blood money $200 early termination fee just to stop sucking the teat of this cable Tv bullshit. Mostly garbage and commercials anyway.

    • Semiotics says:

      You’re 1-2 decades or so behind, but at least you’re finally cutting the chord. Congrats! TV, like most vices we all gravitate to, should never become a dependency. Most people use about 25% of their computing power. Most people utilize about 40% of features their shiny new mobile devices offer (with a 2-year contract pyramid scam). Most people watch 10% of all the lousy channels CATV so generously provides for us. Most people never read the Owner’s Manual of their expensive new motor vehicle! The list goes on and on. Two-year contracts? Cancellation fees? Throttling speeds? Data caps? Bogus channel line-ups? Prime-time traffic bottlenecks? We are paying WAY TOO MUCH for what? For these companies to just get rich off us year over year. Boo-hoo! So CATV are losing customers. No. Customers are FINALLY getting smart. We all have the ability to fight back. Simply stop paying for what you don’t need. Cheers :)

  11. Marie says:

    That sound you hear is the world’s smallest violin playing for Directv. We said “Adios” to them about three years ago. They were so condescending at the time saying “we would be back.” Now they keep sending us offers to come back. I love their misery after the years of misery they provided us with.

    • Peter says:

      It would be well worth it. Just make sure you’re not stuck with Comcast for high speed internet, or they’ll gouge you. I found a low cost provider of Internet before cutting the cable two months ago. Haven’t regretted it for a minute.

  12. Dunstan says:

    To those who bemoan not being able to see the sports events they like, simply Google “(sports event)” for free online and voila; you’ll find every singe sport, game etc. available at any given moment.

    • Eggplant says:

      Not exactly. I mean you can find an unstable, illegal stream in all its low quality audio and poor resolution glory. But most people want more.

  13. postmortem says:

    “My own prediction is that it will be at least five years for 10% of the market to move…”

    Dude, all we are waiting for is Discovery Network to show up on the new AppleTV in September and then we will be running with scissors to the cable box.

  14. yankeedjw says:

    I use Sling TV and MLB.tv for live sports and news, and Netflix and Amazon for everything else. All of that adds up to roughly $45-$50/month. I can’t even imagine paying a real cable bill anymore.

    • Bill B. says:

      The problem with MLB.tv is the home game blackouts. I live in a state that doesn’t even have a pro baseball team, but because I live next to a state that has a pro team, I’m blacked out even though it takes at least 3 hours each way to get there and back. I doubt from here that blacking us out is helping attendance there even a tiny bit. Very frustrating. I can understand, though I don’t like it, why home games get blocked out, but hello?! I’m not spending 6 hours in a car minimum to see a baseball game. Very irritating.

      • yankeedjw says:

        That is definitely a big complaint for a lot of people and hopefully they just remove the blackouts all together soon. I fortunately don’t have an issue with it except when my team is playing the local team.

        I forgot to add that I get another 10-15 broadcast channels in HD with an antenna I got for $4 from a going-out-of-business Radio Shack.

  15. Todd Strangler picture used on “his”article about Pay-TV to depict Cord-Cutting issue is arrogant, insensitive and racist. But then again is the spirit of satan manifesting…🙏🏽👏🏻❤️

    • Jedi77 says:

      Someone needs to get a life…

      A noose is by itself not racist.
      Is using a noose in a movie racist?
      Was The Dirty Dozen racist?
      Is Alice Cooper racist when he uses it on stage?

      Or are you just very easily offended?

  16. percysowner says:

    I moved in November and wasn’t quite ready to cut the cord. I ended up in a 2 year contract with Dish. Once that’s over, I’m cutting the cord. For the few series that I can’t get legally over Hulu or Netflix, I can buy them streaming on Amazon and still save money. Or I can wait for them to come out on DVD and then use Netflix or buy them.

    The companies are going to have to find a way to cut the prices of their services. They are going to have to offer people the option of paying only for the channels they want to watch. Times are changing and they need to change with them.

  17. Elanore says:

    The part that they are missing is that while the people leaving are existing customers, the real problem is that the Millenials are not adopting – what is called an Opportunity Loss. If they were sharing the calculated Opportunity Loss in their quarterly reports, the shares would never recover. Head in sand. Just like the utility companies trying to eliminate the coming of solar by changing state law. Adapt or die, we’ve seen it all before. It will continue, and there is not stopping it. Ba-bye big media…

  18. deanmou says:

    not to sound like a hipster but I cut the cord 25 years ago. Didn’t regret it a day. Each year saw more entertainment options and I swear I’ve salvaged millions of brain cells by not getting my news and information from television.

  19. Dave says:

    I cut the cord 5 years ago, and have not really regretted it. The only thing I miss is live sports, but I don’t miss it enough to pay someone ~$100/mo for hundreds of channels I’ll never see. And between Netflix, Amazon, and Hulu I have more content than I could ever conceivably watch in a lifetime.

    • Peter says:

      Sports won’t remain a problem for long. Already ESPN has moved to streaming, and Yahoo will stream an NFL game later this year. When CBS, NBC, and Fox figure out that they’re losing advertising dollars because of widespread defection to streaming content, they’ll cave and bundle their sports with an affordable streaming package. The signs are already there. You see media stock prices dropping already.

    • Bill B. says:

      Yeah, the problem is sports.

    • Charlie says:

      I haven’t fully cut the chord yet because I have one family member that insists on her shows. BTW, I hate her shows. I watch the OTT streaming services and find that I still don’t have time to watch everything. The local channels provide more than enough sports for me and I don’t miss any of my ESPN channels. I believe ESPN lost sight of the consumer and has gotten caught up in its own hubris. I could get Sling TV but don’t see the need for it. My children don’t watch TV on their TVs but phones, tablets and computer screens. Cable should better define their model if they decide to continue with video. Their Internet prices are not the new cash cow, but they act like it is. They should try to put someone with a level head in charge of pricing and the ridiculous fees. Congratulations to all cord cutters – I believe that you all leading the charge for the rest of us. I’ve spent over $100 per month on cable for 10 years – that’s $12000 people. I’d have more if I just stuck it in a low interest bank account. Shame on me – I should have just given it to the homeless.

      • Peter says:

        Charlie, you do know that most shows are available on Hulu the next day, right? 8 bucks a month, maybe you should check it out and start building that bank account.

    • Ernest says:

      I cut the cord last month and I don’t miss it. I’d been paying $89/mo for the mid level package. When I called to cut it, they offered me all of the channels I had in my current package (less ESPN and BRAVO) for $17.95/mo. If I had known that I would have cut it sooner. Making matters worse all of the cable companies are switching to digital which requires you to purchase/lease a “mini box” for every TV in the house. The first year is free but the next year its $2 month and higher.

      I live in Orange County, CA so I built an antenna for around $10 to pick up live TV which is broadcast in HD. The quality is better than you get with cable. So between the antenna and my ROKU with Netflix and HULU I get everything I need.

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