A new report posits that US pay-TV cord cutting will quadruple between 2020 and 2025, compared to the previous 2015-2019 period. The 36% loss of subscribers from its 2020 base will mean traditional pay-TV services will be in fewer than 50% of US broadband homes for the first time in more than a decade. Pay-TV penetration stood at 62% of US broadband homes at the end of Q2 2020.
The report, from researcher/consultant The Diffusion Group, said 53% of broadband HH would be without a pay-TV service. In 2011, that number stood at 8%, increasing to 27% by 2020.
Michael Greeson, president and principal analyst at TDG, said an increase in the rate of decline for legacy pay-TV services had outpaced the uptake of virtual pay-TV services like Sling TV, AT&T TV Now and Hulu+ Live TV.
“Our 2017 forecasts underestimated the growth in cord-cutting and overestimated the uptake of vMVPDs,” he said.
In 2019, MVPDs lost 6 million subscribers, 7% more than it lost in 2018. In the first two quarters of 2020, pay-TV providers lost 3.34 million customers, including 365,000 virtual pay-TV customers from Sling TV, AT&T TV Now and Hulu + Live TV.
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We’ve seen six consecutive quarters of losses exceeding 1 million subscribers and we’ll be hearing about the seventh in coming weeks. The pay TV industry is at a household penetration not seen since 1995.
Covid-19 will continue to accelerate the losses, as subscribers chose less expensive entertainment options while the industry deals with the loss of live sports, the delayed start of the new season, and the rising cost of services even as the economy stutters.
With the losses we’ve already seen this year, during a time where streaming numbers grew in excess of 40% in the US, it’s not hard to imagine an overall decline in pay-TV subscriptions exceeding last year’s worst-ever 7% decline. As I said, we’ll find out a lot in the next couple of weeks.
The bottom line
While virtual pay-TV services were expected to provide a lifeboat, of sorts, for operators it just hasn’t. The rising costs and bloated channel lineups are the antithesis of what viewers want. Pat-TV 2.0 has been a dud, much like pay-TVs previous great hope, TV Everywhere. It was among the fastest technologies ever rolled out and had, pretty much, the lowest uptake among consumers, most of whom never even heard of it.
Right now, operators stand to gain more from pushing OTT content to subscribers across their high-margin broadband products than they do in providing their own pay-TV service, which have seen margins shrink. That’s one of the main reasons that, for at least the past four quarters, CEOs of telecoms, satellite companies and cable operators all have been talking about their business as “connectivity.”
Add in next-gen 5G wireless delivery and the it becomes pretty clear that the “Age of Pay TV,” which has had a pretty good run, is coming to an end.
Linear TV is dead, the future is over-the-top… Just ask the folks at Disney.
Stay tuned and stay well.