Pay-TV set-top connections hit lowest share since 2010

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For the first time in a decade, the number of TV sets in the US connected to a pay-TV providers’ service has fallen under 50%. A new study from Leichtman Research Group said just 47% of all TVs in use have a providers’ set-top box, the first time since 2010.

Also down: Total connections. Just 75% of TV households nationwide subscribe to some form of live pay-TV service, LRG said, down from 84% five years ago and from 87% in 2009. That 75% is similar to the number of households that watch TV that currently take a subscription video service like Netflix, Hulu or Amazon Prime.

Just more than half (54%) of TV households have both a cable, satellite or telco video service and an SVOD service, while a nearly equal number 21% and 20% respectively have only a pay-TV service or only an SVOD service. Just 5% have neither, LRG said.

Pay TV losing younger viewers faster

Not surprisingly, older demographics remain more likely to subscribe to a pay-TV service than do younger consumers. About 83% of adults ages 45+ have a service – compared to 64% of ages 18-44.

Households with more TVs are more likely to be connected to a pay-TV service, with 87% of households with three or more TVs subscribing. That compares to 75% of households with two TVs, and 52% with one TV.

Overall, 27% of households now have an over-the-air antenna, LRG said, including 53% of non-subscribing TV households.

One other very worrisome trend is the decay in the number of households subscribing to a bundle of service from a cable, telco or satellite provider, which for years has been a measure of the industry’s health and profitability. Combining high-margin phone and Internet service with low-margin video services has been crucial.

LRG said just 60% of providers now have a bundle of services, compared to 67% in 2014.

Finally, the cost of pay-TV services continued to rise. LRG said the average price tag was up about 6% since 2016 to $109.60.

The report is based on a telephone survey of 1,115 US adults age 18+. It has a statistical margin of error of +/- 2.9%.

The bottom line

The pay-TV business is evolving rapidly, with alternative video sources like Netflix et al setting a new table of choices for consumers. As AT&T CEO Randall Stephenson said during the telco’s Q2 earnings call with analysts last month, the speed of the changes caught many traditional media companies and distributors by surprise.

With a new wave of services just surfacing — Disney+ and Apple TV+ — the changes and challenges aren’t likely to slow down and slow-moving media companies risk being swamped by the rising tide around them.

Stay tuned.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and onLinkedIn

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