Evidence grows of cord-cutting acceleration
Pay-TV providers had their worst three-month period ever between April and June 2015, losing more than 600,000 subscribers, analysts say.
Cord-cutting was the culprit that led U.S. cable, satellite and telecom pay-TV companies to their biggest collective quarterly decline of about 625,000, according to a report out Thursday from research firm SNL Kagan. As consumers dabble in the growing number of Net-delivered video options, including Sling TV, Sony PlayStation Vue and HBO Now, a growing number are leaving the traditional pay-TV service behind, says SNL Kagan analyst Ian Olgeirson.
"You certainly have an emerging slate of options for consumers outside of the multichannel space ... and there's the continued gravitational pull of Netflix and Hulu," he said.
Despite the losses, the number of pay-TV subscribing homes and businesses remains at 100.4 million, with 83% of homes still connected. But the combination of two slow consecutive quarters could signal an accelerating exodus, Olgeirson said.
Traditionally, the first quarter of the year — January to March — is fairly strong for the pay-TV segment and cancels out the traditionally weaker slow second quarter, he said. This year, pay-TV companies lost 26,000 subscribers in the first three months of 2015, compared to an increase of 267,000 in first-quarter 2014.
"In past years, (the two quarters) tended to balance each other. We didn't see that this year," Olgeirson said. "Certainly that portends to a bigger loss for the full year."
The findings echo those released recently by analysts at MoffettNathanson, who estimated that cable, satellite and telecom pay-TV providers lost about 566,000 subscribers from April-June 2015. Cable companies reduced their rate of lost subscribers, while satellite and telcom providers saw their rates worsen, the analysts say.
Taking in account the growth in new households, the number that are either cutting the cord or never subscribing to pay TV is nearly 2 million over the past year. "New households are being formed precisely by the Millennials that least likely subscribe to Pay TV," the analysts said in a note to investors.
CEOs at the helm of pay-TV giants have acknowledged the changing TV marketplace, driven by consumer desires for more video delivered in more ways. "The world has changed," said Dish Network CEO Charlie Ergen during a conference call with analysts about the satellite TV provider's second-quarter earnings. The company, which lost more than 81,000 satellite subscribers during the period, began offering the Net-delivered video service Sling TV in February.
"All we can do, as management, is prepare for it and manage our way through that economically for the long term," Ergen said, "and not worry about quarter to quarter."
During a call with analysts Wednesday, AT&T CEO Randall Stephenson said the company, which recently acquired Dish competitor DirecTV, expects some "reshifting" of consumer revenues from pay TV to mobile and broadband connectivity.
The company has assumed that the trend of some consumers foregoing pay TV — so-called "cord-nevers" — and cord-cutting "would continue for the foreseeable future," Stephenson said. And cord-shaving — the reduction in programming subscriptions by current pay-TV customers — might "even accelerate," he said.
Stephenson suggested that the growing rate of new homes that will likely subscribe to at least mobile broadband, home broadband or pay-TV helps make the pay-TV subscriber decline "very manageable."
Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider