Cord-cutting is continuing to drive significant declines in pay-TV subscribers, but traditional pay-TV operators appear to be showing signs of being able to stop the bleeding.That’s one of the main takeaways in MoffettNathanson’s quarterly “Cord-Cutting Monitor” report, which the Wall Street research firm issued Tuesday.“To state the obvious, a subscriber decline of nearly 12% per year can hardly be called ‘good,'” the firm’s Craig Moffett wrote. “But, for what it’s worth, we’ve now had three consecutive quarters of improvement in the decline rate of traditional pay-TV. That’s the first time we’ve been able to say that since the decline began” in the early 2010s.“Maybe, just maybe, we’re finding the long-imagined bottom for traditional pay-TV, where sports and news fans are all that’s left,” Moffett wrote.Even if that’s the case, the numbers are still sobering. Penetration of linear video delivered by traditional and virtual MVPDs, spanning both residential and commercial categories, has fallen to below half of all occupied households. The most recent share, 49.4%, is at a level not seen since 1987. Traditional pay-TV operators, the group including cable, satellite and telecom, now has just 34.4% of households.This secular decline, of course, has prompted major cable network owners NBCUniversal and Warner Bros. Discovery to announce spinoffs of their network units in recent months, with more sure to follow. The pay-TV business continues to generate sizable profits and cash flow, just not at the awe-inspiring levels of the 1990s and 2000s.Before you assume that YouTube TV has feasted on the demise of traditional providers, conquering the business by offering a contract-free, internet-delivered solution to customers wary of equipment, trucks and hassles, think again. Moffett estimates that YouTube TV lost 500,000 subscribers in the first quarter. That’s partly a reflection of the “cliff” that rates fall off of in the January-to-March period after the NFL season wraps up, but Moffett notes that there is “more than just seasonality at work.”YouTube TV hiked its monthly price by nearly 14% in January, landing at $82.99. That increase followed a 12% jump in March 2023. “Since launching at $35 per month in Q1 2017, YouTube TV has raised prices by 137%, i.e. a compound annual growth rate of 11.4%, for eight years,” Moffett observed.Conversely, Spectrum parent Charter Communications has been playing the added-value game, integrating streaming services into its pay-TV and broadband offerings. Those extra streamers, the company says, represent about $80 in savings given that they are included without an extra fee.Moffett highlights the muted reaction to ESPN’s current initiative to bring its full suite of linear networks, along with some streaming and digital extras, into streaming.“The very idea of ESPN going over-the-top was, for twenty years, the pay-TV industry’s nightmare scenario,” Moffett wrote. “Oh, how things have changed. When Disney finally did make its big announcement (on May 13), the news was greeted with little more than a shrug. Raised eyebrows, perhaps, but certainly not abject fear.”With more affordably priced video packages available for sports fans, and ESPN representing only a chunk of the total landscape, Moffett doesn’t envision a major rush by sports fans to sign up for ESPN’s new streamer. By 2030, MoffettNathanson estimates, it will have only 3 million subscribers. Disney and ESPN execs have declined to offer any projections.Disney CEO Bob Iger may have been looking at some of the numbers contained in Moffett’s report when he offered an enthusiastic take on linear TV during a CNBC appearance Tuesday.“What we’ve determined is the combination of both” linear and streaming services “is actually a winning combination for us,” he said.
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