You will be redirected back to your article in seconds

Pay-TV Q2 Wreckage Not as Horrible as Feared. But Where’s the Bottom?

Media investors are breathing easier after four big pay-TV operators — Comcast, AT&T, Charter and Verizon — posted second-quarter subscriber declines indicating that the sector’s deterioration, for now, won’t be as catastrophic as Wall Street’s worst-case scenarios.

Those four operators collectively shed 476,000 video subs, with the bulk of those coming from AT&T’s record loss of 351,000 U-verse and DirecTV satellite accounts. To be sure, the foursome’s losses were double the 237,000 net TV subscribers they dropped in Q2 2016.

But after disastrous declines in the first quarter of the year, analysts say the bottom isn’t dropping out of the pay-TV market as quickly as feared.

“Q2 is now setting up for linear declines to be more like 500k worse y/y, and if we extrapolate this forward it implies 2017 could see total linear+virtual pay TV subs down ~3%,” RBC Capital Markets analyst Steven Cahall wrote in a research note Thursday. Previously, he had projected that U.S. pay TV ops could lose 1.6 million customers in the second quarter, which is a seasonally weak period for the biz.

With the pay-TV carnage seemingly not spiraling out of control, stocks of major media conglomerates with TV holdings rose Thursday amid a broader market decline as the S&P 500 nosed down 0.1%.

Gainers included 21st Century Fox (+4.7%), AMC Networks (+4.5%), Viacom (+3.3%), Disney (+2.9%), Scripps Networks Interactive (+2.8%), Time Warner (+1.5%), CBS (1.4%). Discovery Communications, which has emerged as the sold bidder for Scripps after Viacom pulled out of talks, fell 0.7%.

Still, there’s no denying that subscription TV, with fat channel bundles that have buoyed mediaco profits for years, remains under pressure — and will continue its long, slow descent.

“While less bad, this is still a big acceleration vs. 2016 and arguably not good for media estimates,” he wrote. Referencing George W. Bush’s infamous “Mission Accomplished” speech about the Iraq war in 2003, Cahall wrote: “We think claiming victory on subs here misses hard times still to come.”

The scorecard right now: Comcast reported a net loss of 45,000 residential TV customers during the period, Charter dropped 90,000, Altice USA (encompassing the former Cablevision and Suddenlink operations) lost a net 37,000, and Verizon shed 15,000 Fios Video subsAT&T’s decline of 351,000 traditional satellite and fiber TV subs was offset by the addition of 152,000 DirecTV Now customers in Q2, so the telco claimed an overall net loss of 199,000. But it’s worth noting that the internet-delivered DirecTV Now packages include smaller channel bundles, stripping out dozens of cable nets.

With concerns about cord-cutting and OTT competition still top-of-mind, there’s “no room for sloppy execution” for pay-TV operators, Macquarie Capital analyst Amy Yong wrote in a note.

Meanwhile, Dish Network remains a looming wildcard in the final analysis of pay-TV’s Q2 numbers. The company, set to report second-quarter earnings Aug. 3, has represented the large majority of the sector’s sub loss over recent quarters — around 78% of annual net losses on average over the past four quarters, according to RBC’s Cahall.

If Dish and some smaller distributors come in with heavy losses, Q2 could still be on track for a 4%-5% net decline, Cahall warned. And, he added, the shift to “cord-shaving” — as consumers opt for cheaper, skinnier bundles — “means media affiliate revenues are likely to get hit harder than pay-TV sub declines.”

More Biz

  • Jamie FoxxBET Awards, Show, Los Angeles,

    2018 BET Awards: Kendrick Lamar Wins Big at Youth-Centered Show

    Media investors are breathing easier after four big pay-TV operators — Comcast, AT&T, Charter and Verizon — posted second-quarter subscriber declines indicating that the sector’s deterioration, for now, won’t be as catastrophic as Wall Street’s worst-case scenarios. Those four operators collectively shed 476,000 video subs, with the bulk of those coming from AT&T’s record loss […]

  • Variety.com Traffic January

    Variety Wins Entertainment Journalist of the Year and Best Website at SoCal Journalism Awards

    Media investors are breathing easier after four big pay-TV operators — Comcast, AT&T, Charter and Verizon — posted second-quarter subscriber declines indicating that the sector’s deterioration, for now, won’t be as catastrophic as Wall Street’s worst-case scenarios. Those four operators collectively shed 476,000 video subs, with the bulk of those coming from AT&T’s record loss […]

  • Kendrick Lamar

    2018 BET Awards Complete Winners List

    Media investors are breathing easier after four big pay-TV operators — Comcast, AT&T, Charter and Verizon — posted second-quarter subscriber declines indicating that the sector’s deterioration, for now, won’t be as catastrophic as Wall Street’s worst-case scenarios. Those four operators collectively shed 476,000 video subs, with the bulk of those coming from AT&T’s record loss […]

  • SAG-AFTRA Hit With Class Action Suit

    SAG-AFTRA Hit With Class Action Suit Over Streaming Music Service Fees

    Media investors are breathing easier after four big pay-TV operators — Comcast, AT&T, Charter and Verizon — posted second-quarter subscriber declines indicating that the sector’s deterioration, for now, won’t be as catastrophic as Wall Street’s worst-case scenarios. Those four operators collectively shed 476,000 video subs, with the bulk of those coming from AT&T’s record loss […]

  • Quavo, Gucci Mane Share Songwriter Honors

    Quavo, Gucci Mane Share Honors, Warner/Chappell Named Top Publisher at ASCAP Rhythm & Soul Awards

    Media investors are breathing easier after four big pay-TV operators — Comcast, AT&T, Charter and Verizon — posted second-quarter subscriber declines indicating that the sector’s deterioration, for now, won’t be as catastrophic as Wall Street’s worst-case scenarios. Those four operators collectively shed 476,000 video subs, with the bulk of those coming from AT&T’s record loss […]

  • Harvey Weinstein arrives to court in

    Weinstein Co. Sale Price Cut From $310 Million to $287 Million

    Media investors are breathing easier after four big pay-TV operators — Comcast, AT&T, Charter and Verizon — posted second-quarter subscriber declines indicating that the sector’s deterioration, for now, won’t be as catastrophic as Wall Street’s worst-case scenarios. Those four operators collectively shed 476,000 video subs, with the bulk of those coming from AT&T’s record loss […]

  • Ryan Kavanaugh

    Relativity Media Investor Claims $12.5 Million Fraud

    Media investors are breathing easier after four big pay-TV operators — Comcast, AT&T, Charter and Verizon — posted second-quarter subscriber declines indicating that the sector’s deterioration, for now, won’t be as catastrophic as Wall Street’s worst-case scenarios. Those four operators collectively shed 476,000 video subs, with the bulk of those coming from AT&T’s record loss […]

More From Our Brands

Access exclusive content