No-Pay-TV: Consumers Unplug Cable In Favour Of Streaming Services

By Glenn Dyer | More Articles by Glenn Dyer

For the US cable TV industry, it’s back to 1995 as millions of people drop out or just don’t bother connecting or re-connecting their services and instead continue to flee to cheaper streaming options (of which there are now more than 300 such services in the US).

So News Corp’s Foxtel was not alone in losing subscribers in the March quarter – both home and for its streaming services Foxtel Now and Kayo.

The huge US industry, the world’s largest, lost a record number as well in the same three months. COVD-19 can be blamed for the impact on sport (which is a big attraction for subscription services) but so is the cost of the Pay TV packages, and the cheapness and ease of joining the streaming services, led by Netflix.

At a time when streaming video companies are seeing an upsurge in subscriber numbers and viewing – data from US company, Recurly, which makes subscription management systems, suggests a near 38% rise from March to April in new subscribers by streaming services offering original programming. America’s huge Pay-TV industry saw its biggest ever fall in quarterly subscriber numbers – more than two million.

Cable penetration, therefore, fell sharply in the quarter to 1995 levels – around 65% of America’s 128 million homes in the first quarter, down from more than 67% of the 127.8 million homes in the first quarter of 2019.

Led by Netflix and Disney+ tens of millions of people took up subscriptions to streaming video services in the March quarter globally and in the US. Netflix added 2 million to its US and Canadian base (to more than 69 million in the March quarter). Disney saw the number of its subscribers jump from 28 million last November to 54.5 million in early April.

But according to US firm Leichtman Research Group, the Pay TV sector – cable, satellite, and virtual – lost more than 2 million subscribers in the March quarter, more than double the rate a year earlier when around 1.025 million subs dropped their deals.

“Pay-TV net losses of over 2 million subscribers in 1Q 2020 were more than in any previous quarter,” said Bruce Leichtman, president, and principal analyst for Leichtman Research Group, in a statement. “The record net losses were partly related to the impact of the coronavirus, but do not solely reflect consumers’ dropping services. Several providers cited a decrease in connects as a key component of net losses in the quarter, rather than an increase in disconnects.”

According to Leichtman, the top US pay-TV providers account for 83.9 million subscribers: the top seven cable companies (such as Comcast) have 45.2 million, the top satellite TV services (such as Dish) have 24.1 million, the top telephone companies have 8.2 million (Verizon) and the top publicly reporting virtual services (such as Hulu) have 6.4 million.

Leichtman’s numbers show that satellite providers (particularly DirecTV which is owned by AT&T) accounted for the bulk of net video subscriber losses. Satellite TV services lost about 1,030,000 subscribers in the first quarter, up from 810,000 subscribers one year ago. DirecTV lost 897,000 and Dish Network lost 132,000.

Led by Comcast with a loss of 409,000 subscribers, the top seven cable companies lost about 595,000 video subscribers, up from about 335,000 one year ago. The top telephone companies lost about 125,000 video subscribers in first quarter, up from a net loss of about 105,000 subscribers one year ago. AT&T U-verse held steady but Verizon Fios lost 84,000 and Frontier dropped 39,000.

Among the virtuals Hulu+, Live TV, Sling TV and AT&T TV dropped a combined 320,000 subscribers in the first quarter. Hulu’s net gain of 100,000 wasn’t enough to offset continued losses for AT&T TV Now and Sling TV.

AT&T is the big loser – DirecTV and AT&T TV Now are dropping hundreds of thousands of customers and its $US85 billion takeover of Time Warner is looking more and more costly thanks to COVID-19 in the most part. That’s why the launch shortly of HBO’s streaming service is so important. HBO Max launches in the US on May 27.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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