Why Q2 Cord-Cutting Wasn’t As Bad As Feared (But Not Good, Either)

Cord Cutting Chronicles
Cheyne Gateley/VIP

The MVPD numbers are in for Q2, and they aren’t as bad as VIP anticipated, with two providers (Charter and Dish) actually seeing modest subscriber increases totaling 107,000.

Despite our doom-laden prophecy not being met of 2 million subscribers canceling service from April through June, the 1.5 million who did cut represent the third worst quarter of losses on record, behind only Q1 2020 (1.7 million) and Q3 2019 (1.6 million).

Much as it gets harder to ignore climate change as summers continually get hotter, the fact that the last four quarters have seen the four greatest posted subscriber declines suggests that this trend will continue to grow in the near future.

Among the individual MVPDs, Charter had the best news, with a net total of 102,000 video additions. The cable provider benefited from government programs designed to keep Americans connected, reporting that 12,000 new video subscriptions came from TV upsells from the “Remote Education.” 

An additional 147,000 resulted from the FCC’s “Keep Americans Connected” pledge, where providers pledged to not disconnect customers who were impacted by the pandemic and behind on their bills. In Charter’s case, they waived $76 million in residential fees owed, effectively paying to keep their customers connected.

Summed up, that’s 159,000 new subscribers due to government programs. But Charter only reports 102,000 additions — as in, 57,000 fewer than their total additions. In other words: Had there not been special action due to Coronavirus, Charter would have posted a subscriber loss.

To illustrate what desperate times these are for Pay-TV service operators, the market reacted with considerable excitement that forgiving customer debts and keeping them connected helped Charter avoid a decline in subscribers for the first time since Q4 2017. In the days that followed its July 31 earnings call, Charter stock rose by $38.43 (6.8%) versus price before earnings, closing at $601.87 on August 7.

Among the virtual MVPD services that have reported (Hulu, Sling TV and AT&T TV Now), growth continues to slow, if it exists at all. Hulu reported a skimpy 100k in additions, while both Sling TV (-56k) and AT&T TV Now (-68k) saw declines, with AT&T’s VMVPD product notably seeing 1,089,000 fewer subscribers than in Q2 2018.

Google continues to not report YouTube TV’s figures since giving an update in Q4 2019 that the service had over 2 million subscribers. With a considerable price hike in July — the second in 15 months — VIP suspects there will have been some cancellations to that service.

It seems clear that VMVPDs are not the safety net for traditional Pay-TV customers looking for a new option. With some, notably FuboTV (which hasn’t reported a subscriber figure since Q4 2019’s 316k), now bizarrely costing the same, if not more than, cable service, consumer migration to these packages will continue to slow. 

That is, unless the improbable happens and network groups like ViacomCBS realize the reason consumers are cutting the cord is due to paying for hundreds of channels they don’t watch. Thus perhaps making sure that VMVPDs carry 14 of your networks — as ViacomCBS did with YouTube TV, which was the main reason for the $15 price hike — isn’t such a smart idea.

Instead, expect VMVPD subscriber counts to crest very soon, as, other than Sling TV, they don’t represent a markedly different service to MVPDs, other than being delivered via the Internet instead of a cable, satellite or fiber-optic cable. 

MVPDs will continue their grim descent into the netherworld of subscriber losses. To date, 2020 has seen 3.2 million subscribers cancel service. This leaves VIP’s 2020 cord-cutter estimate in a quandary: Do we stick with 8 million losses for the year, requiring some record-breaking figures for Qs 3 and 4? 

Looking at current trends, VIP is opting to revise our prediction. We think for the second half of 2020, there will be 3.5 million MVPD service cancellations, netting out at 6.7 million for the year. This will represent at least one more record quarter for losses and another year in total of mounting declines. The cutting numbers may not have yet gone over the cliff as anticipated, but they are teetering.