With Q3 2020 in the dust and earnings season fast approaching, VIP estimates that Q3 will see a subscriber decline of 1.75m among the public MVPDs: Altice USA, AT&T, Charter, Comcast, Dish and Verizon. This would make it the worst quarterly decline on record.
Q2’s results were as bad as you might expect during a pandemic, though not as bad as some feared. There was the surprise of Charter adding 110k new subscribers, the first quarter resulting in a net addition for the provider since Q4 2017.
That increase was due in part to the FCC’s Keep Americans Connected Pledge, which enabled MVPDs to retain defaulting customers instead of canceling their service, as well as upselling TV subscriptions to new internet subscribers. Though the pledge expired on June 30, Charter issued a statement reaffirming commitment to its terms throughout 2020.
Another Q2 buffer was the federal government’s pandemic unemployment compensation plan (FPUC), but that expired at the end of July and will have repercussions for pay-TV subscriptions.
While the millions of Americans claiming weekly unemployment has declined since May’s peak of 24.9m, there were still 12.6m claims as of Sept. 5. To put this in context, this is 628% greater than the level reported for Jan. 11 (1.7m).
There were likely some households that had been paying their cable bill with the boosted FPUC income. With that revenue now gone, more cancellations than Q2 saw is likely. Factor in that MVPDs no longer have to abide by the FCC’s pledge and can cut loose defaulting customers, and it’s easy to envision high declines.
VMVPD services will also continue to post not so enthralling numbers. Only three major VMVPD services currently regularly report their subscribers (YouTube TV, FuboTV and Philo do not keep an orderly cadence), and of these, only Hulu’s service has seen modest growth of 100k a quarter. VIP’s estimate is that Hulu’s moderate increases will continue but Sling TV and AT&T TV Now will post losses for the fourth and eighth straight quarters, respectively.
It’s not that subscriber declines are a new phenomenon. VIP’s Q2 preview looked at the growing erosion of the consumer value of cable TV, coming as media companies pull back their cable content in favor of direct-to-consumer streaming services.
With most networks’ production impacted due to COVID-19, the value of cable will be weakened further still. This self-erosion will haunt the networks. The deliberate lack of value makes it hard to imagine many consumers cutting the cord due to economic necessity who will restore their subscriptions once better times return.
This makes it a very uncomfortable time to be a small independent TV network. When MVPDs had 90m subscribers, smaller networks such as Fuse or El Rey could get by on small affiliate fees. Now that there are fewer consumers, and the remaining ones are more cost-conscious, these networks are the ones being cut by MVPDs in order to keep bills down. Don’t be surprised if COVID ends up claiming network scalps as a result of increasing subscriber cuts.