Technology | Media | Telecommunications

Thursday, January 07, 2016

American Pay-TV Market Transformation is Still Evolving

Reporting on the American pay-TV market during the last couple of years was somewhat predictable -- it's been an ongoing decline of subscribers as price increases motivated consumers to consider other video entertainment options.

More and more American baby boomers in urban areas bought a digital TV indoor antenna and switched to free over-the-air HDTV broadcast services. For younger adults, traditional pay-TV wasn't viable -- why pay for advertiser-supported content that's available online for free or at a much lower cost via Hulu?

Furthermore, as more online subscription video-on-demand services -- such as Netflix and Amazon Prime -- gained momentum, it became clear that the traditional mass-media TV was losing its appeal. Besides, a movement toward the adoption of over-the-top video entertainment seemed to be perpetual. But this market shift could still decelerate, given some of the recent trends.

According to the latest market study by Leichtman Research Group (LRG), the thirteen largest pay-TV service providers in the U.S. market -- representing 95 percent of the total market -- lost about 190,000 net video subscribers during the third quarter 2015 (3Q 2015), that's compared to a loss of about 155,000 subscribers in 3Q 2014.

Other key findings for the study include:

  • The top nine cable companies lost about 145,000 video subscribers in 3Q 2015 – compared to a loss of about 440,000 subscribers in 3Q 2014, and a loss of nearly 600,000 subscribers in 3Q 2013.
  • However, top cable MSO losses were the fewest in any third quarter since 2006.
  • Satellite TV providers added 3,000 subscribers in 3Q 2015 (including gains from DISH's Internet-delivered Sling TV) – compared to a loss of 40,000 in 3Q 2014.
  • The top Telcos lost about 49,000 video subscribers in 3Q 2015 – compared to a gain of 323,000 net additions in 3Q 2014.
  • AT&T U-verse had 300,000 fewer adds in 3Q 2015 than in 3Q 2014.
  • Meanwhile, overall Telco net adds in 3Q 2015 were the fewest in any quarter since the services started in 2006.
  • Over the past year, the top pay-TV providers (including DISH's Sling TV) lost about 400,000 subscribers – compared to a loss of about 130,000 subscribers over the prior year.

According to the LRG assessment, net losses among major pay-TV providers (including DISH's Sling TV) in 3Q 2015 were similar to a year ago, but the quarter also displayed continuing share shifting within the category.

With AT&T adjusting focus from its U-verse TV service to its newly acquired DirecTV satellite service, Telcos reported their worst quarter ever in 3Q 2015.

Conversely, top cable providers cumulatively had their best third quarter since 2006 – the year when Telcos began offering video services. Regarding the overall market outlook, we'll have to wait and see the fourth quarter results. Perhaps legacy cable TV service subscriptions will stabilize, if they can offer lower-cost options.