Pay-TV video subscriber losses continue to be high-speed internet’s gain, albeit more slowly.
New data from Leichtman Research Group found that the largest cable and wireline phone providers and fixed wireless services in the U.S. – representing about 96% of the market – acquired about 670,000 net additional broadband internet subscribers in Q2 (ended June 30), compared to a gain of about 1 million subs in in the previous year period.
These providers account for about 110 million combined subs, with top cable companies having about 75.6 million broadband subs, top wireline phone companies having about 32.2 million subs, and top fixed wireless services having about 2.2 million subs.
Leichtman found that overall broadband additions in Q2 were 67% of those last year. The top cable companies lost about 60,000 subs in the quarter compared to about 840,000 net adds last year. The top wireline phone companies lost about 85,000 total broadband subs compared to about 50,000 net adds last year.
Wireline Telcos had about 490,000 net adds via fiber, and about 575,000 non-fiber net losses. Fixed wireless/5G home Internet services from T-Mobile and Verizon added about 815,000 subs compared to about 120,000 net adds last year.
“Over the past year, there were about 3.26 million net broadband adds, with fixed wireless services accounting for 56% of them,” senior analyst Bruce Leichtman said in a statement.
Comcast, the nation’s largest cable TV operator, continues to hemorrhage video subscribers. The Philadelphia-based operator July 28 announced it lost 521,000 video subs in the second quarter, ended June 30. That was up 30% from a loss of 399,000 video subs in the previous-year quarter.
Through six months of the fiscal year, Comcast has lost more than 1 million video subs as consumers drop pay-TV in favor of alternative video entertainment options such as subscription and ad-supported video-on-demand. The company lost 889,000 video subs in the prior-year period.
CEO Brian Roberts
Comcast ended the quarter with more than 17.1 million video subs, down about 10% from more than 18.9 million subs last year.
Saving the day again — sort of — was high-speed internet. Comcast added 262,000 board band subs through six months of the fiscal year, which was down 68% from last year. Comcast added no broadband subs in the second quarter compared with the net addition of 354,000 high-speed internet subs last year.
While subscribers decline, Comcast Communications revenue is going the opposite direction — thanks to rate increases. Revenue in Q2 increased 3.7% to $16.6 billion, driven by increases in broadband, business services, wireless, and advertising revenue, partially offset by decreases in video, voice, and other revenue. Broadband revenue increased 6.8% due to an increase in average rates and an increase in the number of residential broadband customers compared to the prior year period. Business services revenue increased 10.1% due to an increase in average rates, an increase in the number of customers receiving our services, and from a recent acquisition.
Despite the negative trends in Comcast’s legacy business, CEO Brian Roberts attempted to put a positive spin on the numbers.
“We achieved our highest adjusted [pre-tax] margin on record even amid a unique and evolving macroeconomic environment that is temporarily putting pressure on the volume of our new customer connects,” Roberts said in a statement.
Verizon, like most pay-TV operators, continues to see an exodus of subscribers, losing 86,000 Fios Video subs in the second quarter (ended June 30) — up from 62,000 video subs lost in the previous-year period. Through six months of the year, Verizon has lost 164,000 pay-TV subs, up from 144,000 subs in the previous-year period.
Verizon ended the fiscal period with 3.4 million Fios Video subs, down from 3.7 million subs during the same period in 2021.
Meanwhile, Verizon added just 30,000 broadband subs, which was down from the addition of 92,000 high-speed internet subs in the previous-year period. The telecom added 85,000 broadband subs in the first six months of the year, down from 190,000 additions a year earlier.
Verizon, which offers free access to Disney+, Hulu, ESPN+ and Discovery+ to select wireless subs, also saw telecom sub additions plummet 76% to 84,000 from 350,000 net adds in the previous period. Through the half-year, Verizon has lost 42,000 telecom subscribers.
“Although recent performance did not meet our expectations, we remain confident in our long-term strategy,” CFO Matt Ellis said in a statement. “We believe that our assets position us well to generate long-term shareholder value.”
Charter Communications April 29 reported a first-quarter (ended March 31) loss of 123,000 video subscribers, compared with a decline of 156,000 subs in the first quarter of 2021. The pay-TV operator had 15.7 million residential video customers at the end of the quarter, down from 16 million subs last year.
Charter added 164,000 residential high-speed internet subs compared to 334,000 subs added during the previous-year period. The company ended the quarter with more than 30 million broadband subs — up about 1 million subs from the same period a year ago.
When combined with Comcast, the two pay-TV operators control more than 60 million U.S. broadband households — underscoring their recent partnership to develop new streaming video platforms that could offer consumers cheaper streaming video access to Netflix, Disney+ and HBO Max, among other third-party services.
“We remain focused on our primary goal of driving connected customer and mobile broadband relationship growth,” CEO Tom Rutledge said in a statement. “Our new joint venture with Comcast will allow us to provide a next generation streaming platform that offers new and differentiated direct-to-consumer products to meet demand in a fast-changing video environment.”
Comcast Cable April 28 reported a first-quarter (ended March 31) net loss of 512,000 pay-TV subscribers, up more than 4% from a net loss of 491,000 video subs in the prior-year period. The cable giant ended the period with 17.6 million video subs, down almost 1.7 million subs from last year.
The sub loss reflects the ongoing consumer transition from pay-TV to alternative channels, including subscription VOD and ad-supported VOD streaming. That said, high-speed internet, a prerequisite to stream video in the home, saw subscriber growth cool for the first time in several quarters.
Comcast said it gained 262,000 broadband subs in the quarter, which was down 43% from a sub gain of 461,000 in the prior-year period. The company ended the period with 32.1 million high-speed internet subs, up from 31 million last year.
The company said the silver lining in the sub growth slowdown underscored the fact that the fiscal period produced the “highest level of customer retention on record for any quarter.”
Comcast also lost 282,000 telephone subscribers, up from a loss of 106,000 subs in 2021. Total voice subs topped 10.1 million, down from 10.8 million last year.
Video revenue decreased 1.5%, reflecting a decrease in the number of residential video customers, partially offset by an increase in average rates. Voice revenue decreased 9.8%, primarily reflecting a decrease in the number of residential voice customers.
The best thing CEO Brian Roberts could say about the cable business was that Comcast was increasing broadband capacity.
“We are providing our customers with cutting-edge equipment that delivers the best in-home experience,” Roberts said in a statement.
A new “Broadband America” report from The NPD Group reveals that only 50% of homes in the continental U.S. have true broadband speed of 25Mbps download or higher despite the growing reliance on connected technology.
In fact, 34% of homes receive internet access at speeds of less than 5Mbps, including 15% that do not have any internet access, according to NPD.
Vermont, West Virginia, New Mexico and Mississippi are among the least-connected states, while New Jersey, Rhode Island, Maryland and California are among the most connected. In Vermont only 24% of homes receive broadband speeds, while in New Jersey 65% of homes do.
“The so-called digital divide is a result of many factors including availability of suitable internet services and the affordability of services that are available in more rural parts of America,” Eddie Hold, president of NPD Connected Intelligence, said in a statement. “But there is potential for this situation to improve relatively quickly, as a result of the American Rescue Plan Act and the Infrastructure Investment and Jobs Act, which are providing key subsidies for deploying faster internet services, as well as funding the Affordable Connectivity Program which provides subsidized internet service to lower-income homes.”
According to the NPD’s “Rural America” report, more-rural and less-connected areas of the United States have far lower ownership levels of connected devices, as well as a higher level of price sensitivity for technology products ranging from TVs to streaming media players and beyond. In fact, while TV unit sales are roughly the same across rural and non-rural areas, the average price is 40% lower in rural areas. When looking at streaming media players, unit sales are nearly 60% lower in rural areas.
“The lack of higher-speed internet limits the opportunity for newer devices and services, as customers do not have the connectivity needed to generate a satisfactory experience,” Hold noted. “That has a ripple-on effect for consumer technology, limiting the need for larger, smarter TVs, streaming devices, or even tablets and newer PCs.”
Parks Associates reports that 55% of U.S. broadband households own a smart-TV, pushing this device to be the default platform for streaming content.
The Dallas-based research firm expects smart TVs to cement their position as the default connected streaming platform in 2022. Consumers are increasingly interested in having all their entertainment available on a single device, and as smart-TVs have become more affordable, with improved user interfaces (UIs), they offer an attractive integrated option for viewing all content.
“Rapid changes in the market over the past two years, combined with continually shifting customer preferences, have forced service and device suppliers to adjust and adapt on an almost daily basis,” Eric Sorensen, senior contributing analyst, said in a statement. “The standard in service now is to deliver desirable content so that consumers can view it when, where, and how they want it. Service providers, both conventional and online, will have to continue to adjust as consumer demands continue to evolve.”
Parks also anticipates streaming services in 2022 will begin to recognize churn as a normal part of doing business. The average churn rate in 2020 was 40%; the current percentage is 45%. Streamers today typically subscribe to one or more foundational services — Netflix, Amazon Prime Video, Disney+, or Hulu — and then add three or more additional services, each offering unique and differentiated content, from which consumers unsubscribe once they no longer see the value in the cost or the content.
“We expect the traditional business models for movie windowing releases to erode more in 2022,” Sorensen said. “The box office will regain some of its strength, as ‘experience’ releases like sci-fi and action-adventure will continue to draw people to the theater, but for many films, movie studios generally benefit from bypassing exclusivity and releasing through multiple channels, including theaters and direct-to-consumer. In 2022, we will see more of this hybrid windowing strategy and experimentation.”
Comcast Cable Jan. 27 reported a loss of 1.49 million pay-TV subscribers in the fiscal year ended Dec. 31, 2021. That compared with a subscriber loss of 1.29 million in 2020. The cabler lost 349,000 subs in the fourth quarter, up 53% from a sub loss of 227,000 in the previous-year period. Comcast ended 2021 with 17.5 million pay-TV subs, down from 18.9 million in 2020.
On the flipside, Comcast continues to grow its high-speed internet market share, ending the year with 29.5 million broadband subscribers. That’s up 4.4% from 28.3 million subs in 2020. Broadband is a requisite conduit to distribute streaming video in subscriber households.
For the year, cable revenue increased 7.1% compared to 2020 to $64.3 billion, driven by growth in broadband, wireless, business services, advertising, video and other revenue, partially offset by a decrease in voice (i.e., telecom) revenue.
“Our top priority is increasing the capacity of our network in the U.S. and further improving our world-class broadband experience,” Comcast chairman/CEO Brian Roberts said in a statement. “[Our] strong operating and financial performance in 2021 was underscored by our highest full-year revenue, [pre-tax earnings] and free cash flow on record. We continue to execute extraordinarily well, strengthening our leadership position in connectivity, aggregation, and streaming.”
Verizon Jan. 25 reported its lost 69,000 Fios Video pay-TV subscribers in the fourth quarter, ended Dec. 31, 2021. That was an improvement over the loss of 72,000 Fios Video subs in the previous-year period. For the fiscal year, Verizon jettisoned 281,000 pay-TV subs to end the year with more than 3.5 million — down from more than 3.8 million at the end of 2020.
Pay-TV’s loss continues to be broadband’s gain as the telecom said it added 55,000 Fios Internet net sub additions in the quarter. In full-year 2021, Verizon reported 360,000 Fios Internet net additions, the best annual performance since 2014. It ended the year with more than 6.5 million broadband subs — up 5.5% from 6.2 million at the end of 2020.
Total quarterly Fios revenue reached $3.2 billion, an increase of 5.7% year over year. Full-year 2021 Fios revenue was approximately $12.7 billion, up 4.6% year over year.
“Verizon delivered another strong earnings performance this quarter,” CFO Matt Ellis said in a statement. He was alluding to the telecom’s strong wireless businesses and rollout of the 5G network. Verizon added 667,000 wireless retail subscribers, which included 336,000 phone net additions and 369,000 other connected device net additions, offset by 38,000 tablet net losses.
The company ended the year with more than 115.3 million wireless subs, up more than 22% from 94.3 million at the end of 2020.
“2021 was a transformational year for Verizon that will serve as a catalyst for us,” said CEO Hans Vestberg.
New Parks Associates consumer research finds that in Q3 2021, 27% of U.S. broadband subscribers reported using the Samsung Tizen Smart TV as their primary device for consuming video content.
“The smart-TV will cement its status as the default streaming platform in the households,” Eric Sorensen, senior contributing analyst, said in a statement.
Sorensen said he expects to see more content partnerships and service acquisitions among providers and manufacturers in 2022. He contends content creators will leverage their ability to reach audiences directly, while service and content providers will adapt their business models to anticipate higher levels of churn than in previous years.
Acquisitions and consolidations are becoming key options for streaming firms to compete in the face of limited material and the constant demand for more new content. Parks notes that the average churn rate for SVODs increased to 45% in 2021, a 5.5% jump from 2020. Consumers hold on to the services they use the most and jump among the others, paying for a program or season and then canceling when they are finished. The number of subscriptions may rise and fall over time, indicating that churn rates will continue to be elevated.
Parks also suggests streaming media providers will face increasing competition from digital and social content producers in 2022. Popular online content creators are circumventing established distribution models and building their streaming applications from the ground up. For instance, KevOnStage Studios, created by comedian Kevin Fredericks, whose stage name is KevOnStage, is very successful with his YouTube channel.
“Streaming apps provide new revenue opportunities, especially with the chance to retain content ownership rights,” Sorensen said. “Digital content creators can monetize content and build audiences collected from social networking and video sharing platforms to their streaming applications and websites.”
The OTT Video Market Tracker, an annual service from Parks Associates, features monthly updates on trends and market activities in the OTT video space, including comprehensive tracking of existing and emerging players and quarterly subscriber estimates.
Parks recently released its annual Top 10 domestic subscription OTT video services, with Disney+ replacing Hulu among the top three.
