The video entertainment market continues to evolve in America. Low-cost, new and improved over-the-top (OTT) video streaming services have made it virtually impossible for the traditional pay-TV providers to justify their high-cost offerings.
Meanwhile, the legacy pay-TV service providers can't halt the continued loss of subscribers, as consumers seek and find alternative sources of news, weather and video entertainment online.
U.S. multi-channel defections ballooned in the third quarter, amplified by tighter promotions at a time when consumers need little additional motivation to seek OTT alternatives, according to the latest market study by Kagan, a TMT research group within S&P Global Market Intelligence.
Pay-TV Market Development
Kagan estimates traditional multi-channel subscribers fell by nearly 1.9 million in the three months ended September 30 -- that's a 25 percent spike from the previous largest drop in the second quarter of 2019.
The combined traditional video subscriptions for cable TV, telco and direct-broadcast-satellite (DBS) finished the quarter at an estimated 85.1 million -- that's down more than 5.8 million in the trailing 12 months at a 6.4 percent year-over-year clip.
Virtual multi-channel gains helped reduce the overall loss of households subscribing to a package of live linear networks, adding 368,000 customers and reducing the combined traditional and virtual category losses to 1.5 million.
Additional study findings include:
Meanwhile, the legacy pay-TV service providers can't halt the continued loss of subscribers, as consumers seek and find alternative sources of news, weather and video entertainment online.
U.S. multi-channel defections ballooned in the third quarter, amplified by tighter promotions at a time when consumers need little additional motivation to seek OTT alternatives, according to the latest market study by Kagan, a TMT research group within S&P Global Market Intelligence.
Pay-TV Market Development
Kagan estimates traditional multi-channel subscribers fell by nearly 1.9 million in the three months ended September 30 -- that's a 25 percent spike from the previous largest drop in the second quarter of 2019.
The combined traditional video subscriptions for cable TV, telco and direct-broadcast-satellite (DBS) finished the quarter at an estimated 85.1 million -- that's down more than 5.8 million in the trailing 12 months at a 6.4 percent year-over-year clip.
Virtual multi-channel gains helped reduce the overall loss of households subscribing to a package of live linear networks, adding 368,000 customers and reducing the combined traditional and virtual category losses to 1.5 million.
Additional study findings include:
- The nearly 8.5 million virtual multi-channel subs contributed to a combined third-quarter tally of nearly 93.6 million subscriptions.
- Kagan estimates that penetrations of combined residential services dropped to less than 72 percent of the 126.3 million occupied households in the third quarter.
- Cable TV operators lost a combined 487,000 traditional multi-channel customers, posting a 1 percent quarterly and a 3.1 percent annual decline.
- The telco video segment experienced its worst performance of the year, losing 192,000 subscribers to record a 1.9 percent quarterly and a 5.6 percent annual decline.
- Satellite TV losses weighed heavily on the U.S. market. Combined losses swelled to 1.2 million, fueling a 4.4 percent quarterly and a 12.3 percent annual drop.
Outlook for U.S. Pay-TV Innovation and Growth
The future is bleak for the legacy pay-TV business model. There are several reasons why this downward trend is unlikely to reverse. Americans have endured the ongoing price increases for broadband service (very high cost, compared to other developed nations), as government regulators failed to deliver policies to manage a cable/telco landline duopoly.
Moreover, pay-TV service providers have been unable to innovate successfully. When their attempts to offer streaming services failed to attract a significant number of subscribers, most continued to raise prices on their broadcast television services. This was also a response to ongoing cable network fee increases, and the carriage fees charged by local broadcast TV stations.
Federal, State and Local government taxes and surcharges of all telecom services also contributes to the high cost of these offerings. When combined, these punitive taxes are similar to those applied to liquor and tobacco. Apparently, American policymakers believe that it's appropriate to apply a 'sin tax' model to communication and video entertainment services.