Q3 Subscriber Losses at 3 AT&T Services Were 80% of Pay-TV Industry Falloff, Says LRG
AT&T had a Q3 net loss of about 1.4 million subscribers across its three pay-TV services -- DirecTV, AT&T U-verse and AT&T Now -- vs. a net loss of about 295,000 subscribers in the year-ago quarter, reported Leichtman Research Group Wednesday. AT&T’s subscriber losses, 79 percent of industry Q3 net losses vs. 30 percent in 3Q 2018, resulted from the company’s decision “to increasingly focus on retaining and acquiring more profitable subscribers,” said LRG principal Bruce Leichtman.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Overall, the largest pay-TV providers, with 93 percent of the market, lost about 1.7 million net video subscribers in the quarter vs. a pro forma net loss of about 975,000 in the year-ago quarter, Leichtman said. It was a fifth consecutive quarter of record pay-TV industry net losses. Among pay-TV providers, cable companies have 46.1 million video subscribers vs. 26.3 million satellite and 8.6 million telephone companies, said LRG. The top publicly reporting virtual MVPD pay-TV services have 3.8 million, it said.
DirecTV had record net subscriber losses for the sixth consecutive quarter, but Dish TV had fewer losses than in any quarter since Q3 2014, said LRG. Losses for the top cable companies widened to 410,000 from 245,000 a year ago; phone company subscriber losses grew to 210,000 from 80,000. Sling TV and AT&T Now’s combined growth slowed to 20,000 subscribers vs. 75,000 net adds in Q3 2018, it said.
Looking beyond trends of accelerating MVPD subscriber declines and fewer vMVPD gains, MoffettNathanson focused on what it considers the bigger picture: The live TV model for entertainment programming is in peril, being displaced by subscription video on demand and ad-based VOD “much more rapidly than the cord-cutting numbers alone would suggest,” Moffett said in a Wednesday email to investors.
A “long-awaited bifurcation” between live sports/news and entertainment is “gathering momentum,” said the analyst. In addition to the challenge of declining distribution, entertainment-focused cable networks are also facing pricing pressure, he said, noting recent promotions from wireless carriers: Verizon unlimited wireless customers are getting Disney Plus free for a year; most T-Mobile unlimited subscribers will get Netflix for free; some AT&T Wireless subscribers will get HBO Max for free; and Apple is giving its fledgling streaming service to Apple device buyers for free for one year.
“Taken together,” said the analyst, “that’s something like half of all American families. Will a generation of Americans be trained to expect that (non-sports) entertainment should cost … nothing?”
Meanwhile, analytics firm OpenVault positioned cord cutters’ exodus from pay TV as an opportunity for service providers. Though the trend toward streaming video's driving “rapid increases in consumption levels,” only 29 percent of consumers upgraded their broadband packages when interacting with operators’ customer care teams to sever video services, said the company in a Wednesday report: Two-thirds of cord cutters maintained the same broadband packages, while 4 percent downgraded broadband service, it said.
“A cord cutting event usually signals a need for faster broadband speeds,” said the report, citing customers’ switch to over-the-top video services, often on multiple devices simultaneously. The trend lends itself to higher speed, higher margin broadband packages to ensure an acceptable customer experience, “and the cord cutting event is the best time for operators to educate customers and upsell them accordingly," it said.