Report: Multichannel Subscriptions Fall Slightly in Q1, But Get Virtual Lift

Combined cable, direct broadcast satellite (DBS) and telecom multichannel subscriptions fell 0.8% sequentially in the first quarter ended March 31, to 93.2 million, including 90.3 million residential customers.

That’s according to the Q1 2018 U.S. Multichannel Subscriber Report by Kagan, a media research group within S&P Global Market Intelligence.

However, noteworthy gains for virtual platforms DirecTV NOW and Sling TV cut the quarterly subscription losses in half, raising the overall residential figure to 94.1 million.

Other findings:

  • The residential multichannel penetration rate stood at 76.1% as of March 31 when including the virtual smartphone platforms owned by AT&T and DISH Network (DirecTV NOW and Sling TV).
  • Cable operators logged their largest first-quarter video subscriber decline on record, with the top two multiple system operators, Comcast and Charter, accounting for 59% of the drop.
  • Telco video appears to be regaining its footing as AT&T’s U-verse stabilizes. The platform’s video customer losses fell below 100,000 for the first time since the third quarter of 2015.
  • DBS losses ramped back up in the first quarter, bringing the sector’s total down to 31.1 million.For more information, visit www.spglobal.com/marketintelligence.

AT&T Launching Additional OTT Video, Online TV Services

AT&T May 15 announced a trio of video upgrades designed to attract consumers across the economic spectrum and, perhaps, influence a federal judge.

Speaking at the JP Morgan Technology, Media and Communications conference in Boston, CEO Randall Stephenson said 2018 priorities remain closing the acquisition of Time Warner, which includes Warner Bros., Turner and HBO, building out its Gigabit network; bowing new streaming video platform with targeted advertising; enhancing profitability of its Mexican wireless operations; and reducing its cost structure.

Federal Judge Richard Leon is expected to rule on the merger June 12.

In video, AT&T launched new capabilities and options for DirecTV Now, including a new user interface. Subscribers can add a third simultaneous stream for an additional $5 per month and will get a beta version of cloud DVR functionality with 20 hours of free storage. This summer, AT&T plans to roll out an option to purchase 100 hours of storage for $10 per month.

Following the close of the Time Warner deal, the company plans to introduce WatchTV, an online TV service without local programming or sports-only channels. WatchTV will be priced at $15 per month,but will be offered for no additional charge for some of AT&T’s unlimited wireless subscribers.

The company also plans to launch a broadband-based premium SVOD service aimed at competing with traditional linear TV products for in-home use, John Donovan, CEO of AT&T Communications, told a separate investor group.

The product will be app-based with a small device that connects to customers’ TVs and home broadband. The ($80-$90 monthly) service will offer the content available on traditional linear TV with a great user experience and lower price points.

With a lower capital intensity and acquisition cost, there is an opportunity to achieve a higher return on investment and comparable margins to traditional satellite video, according to Donovan.

“We won’t roll a [service] truck. The CPE [customer premises equipment, or network, set-top box, etc.] will be cheaper and have lower operating costs,” Donovan told the MoffettNathanson Media & Communications Summit in New York.

The company expects to launch the service by the end of the year.

Research: OTT Service Subscribers to Grow to 400 Million in 2018

Over-the-top services will reach a subscriber base of 400 million in 2018, according to ABI Research’s recently released Service Provider OTT Services and Set-top boxes Update report.

ABI forecasts that OTT video services will put more pressure on traditional pay-TV services, especially in the developed markets with high broadband and pay-TV penetration. The worldwide OTT video market is expected to grow at CAGR 10% to generate $51.4 billion in 2022, according to ABI.

“OTT video services offer less expensive alternatives and no long-term contract features compared to existing pay-TV offerings that are driving an increasing number of Pay-TV customers to switch to these OTT services,” according to ABI.

In markets such as North America and Europe, pay-TV operators have jumped into the OTT market to improve churn by providing less costly video service. DirecTV’s Now, Dish Network’s Sling TV, and Sky’s Now TV are among the operators which offer Virtual Multichannel Video Programming Distributor (vMVPD) services, linear channels via internet connection, according to the report.

“vMVPD services offer live TV packages as low as $10 and customized packages are attracting cost-sensitive customers,” said Khin Sandi Lynn, industry analyst at ABI Research, in a statement.

Dish Network’s Sling has secured more than 2 million subscribers in the two years since it launched, the report noted. DirecTV Now has gained 1.2 million subscribers within one year of its launch, offsetting the subscriber loss of its satellite TV platform.

“Pay-TV operators recognize the consumer demand for vMVPD services and are trying to expand their OTT offering by providing more content choice to compete against other subscription OTT services such as Netflix,” Lynn stated.

Despite the low cost of basic vMVPD packages, the availability of live sports packages and customization features contribute the higher ARPU compared to other subscription OTT services, according to the report. Hulu and YouTube launched live streaming packages in 2017 creating more competition in the vMVPD market.

“As competition intensifies, content and quality of service are crucial to win the OTT war,” Lynn stated.

AT&T Planning $15 Online TV Service

On the witness stand defending his company’s $85.4 billion acquisition of Time Warner as pro consumer, AT&T CEO Randall Stephenson took the opportunity to announce the pending roll out of a $15 monthly online TV service.

Dubbed “AT&T Watch,” the platform would be the cheapest online TV service on the market — $5 less than Dish Network’s Sling TV. It will be marketed as a cheaper version of $35 DirecTV Now with fewer channel selections and no access to live sports, among other restrictions.

The Justice Department last year filed an antitrust lawsuit against the merger, claiming the deal would be bad for consumers. AT&T and Time Warner say the merger helps them stay competitive in the rapidly changing home entertainment market driven by over-the-top video.

AT&T currently offers DirecTV Now at reduced rates, including HBO, in select markets. Sprint Wireless and T-Mobile include free Hulu and Netflix, respectively.

Stephenson said “Watch” would be available free to wireless subscribers – underscoring the probability the platform would be ad-supported and geared toward mobile users.

The platform was hinted at during a pretrial brief.

“The merger will enable AT&T to transform the mobile video marketplace by combining Time Warner’s content assets with its wireless platform to develop new and more valuable services especially for mobile video devices,” AT&T wrote in the brief, as reported by CNN Money. “For example: AT&T would launch a new service with Turner and a small number of popular cable networks, which would be made available for free to AT&T’s wireless customers on unlimited plans and for a nominal price to anyone else.”

 

NAB: 70% of PlayStation Vue Streaming on Non-PS Devices

About of 70% of subscriber streaming on PlayStation Vue occurs through non-PlayStation devices, Dwayne Benefield, VP, head of PlayStation Vue, told attendees April 11 at the Streaming Summit at the NAB Show in Las Vegas. About 80% of streaming is for live TV.

Launched in 2015 by Sony, PS Vue joined Dish Network’s Sling TV attempting to redefine pay-television over the Internet with standalone service offering access to premium channels, including local, without long-term contracts.

The platforms have since been joined by DirecTV Now, Hulu With Live TV, Spectrum TV Plus, YouTube TV and Fubo TV looking to replicate traditional broadcast online with a-la-carte pricing.

Benefield said the average Vue subscriber streams five hours of content daily. While the PS Network has 70 million subscribers across 165 countries, Benefield did not disclose specific subscriber numbers for Vue.

The executive said online TV platforms are getting increased stacking rights to catalog episodes of TV shows as creators and distributors recognize the growing market appeal of online TV.

Benefield said there remains value in the traditional pay-TV bundle, but that online TV represents a growing, cost-effective alternative.

“As [the bundle] does fray, you’ll see us add more a la cartes,” he said in the keynote, as reported by Multichannel News. “I think [online TV] can succeed without broadcast.”

Kagan: Pay-TV Sub Loss Softened in Fourth Quarter 2017

The pay-TV business model may be under siege, but subscriber losses actually slowed for traditional multichannel video providers in the fiscal quarter ended Dec. 31, 2017 – while declining for the full year, according to new data compiled by Kagan, a group within S&P Global Market Intelligence.

Combined cable, satellite TV (Dish Network and DirecTV) and telecom multichannel subscriptions fell to 94 million, including 91.1 million residential customers. Combined, cable, satellite and telecom subs are now down approximately 7.4 million from their peak in 2012.

The total multichannel count, including the top two virtual service providers Sling TV and DirecTV Now, is at 97.3 million.

Cable operators lost an estimated 986,411 video subscribers in 2017, more than twice the 2016 drop. That broke the sector’s three-year streak of decelerating video subscriber losses.

The telecoms (AT&T, Verizon) slowed their net subscriber losses for a third consecutive quarter. The sector shed 903,262 subscribers in 2017 to end the year at 10.6 million.

The satellite sector was down nearly 1.7 million subscribers in 2017 – the biggest annual loss on record, as DirecTV joined Dish Network in posting traditional subscriber declines.

U.S. Pay-TV Revenue to Drop $27B by 2023

Domestic pay-TV revenue is projected to decline $26 billion (26%) to $75 billion from a peak of $101.7 billion in 2015, according to new data from Digital TV Research.

Cable TV revenue will fall to $36.7 billion from a peak of $54.1 billion in 2010 at $54.1 billion. Cable will lose nearly 12 million subscribers, although most of the losses have already taken place.

“Satellite TV and [IPTV/telecom] are also losing subs and revenue,” Simon Murray, principal analyst at Digital TV Research, said in a statement. “Much of this is due to the operators shifting their subscribers to online platforms. However, growth from virtual MVPDs is not expected to make up completely for the subscriber and revenue shortfalls from traditional pay TV.”

The report suggests telecom sub losses are mainly due to AT&T encouraging U-Verse subs to convert to DirecTV. This is the reverse of what has happened in most other countries. Telecom revenue spiked in 2015 at $9.6 billion and will fall to $4.7 billion in 2023. The number of telecom subs topped 12 million in 2014, declining to 6.2 million in 2023.

Satellite TV revenue will decline (16%) from $39.7 billion in 2017 to $33.6 billion in 2023. Satellite TV subs will drop by 4 million from the end of 2017 to 2023 – down 3 million in 2017 alone. Dish is pushing its Sling TV platform, with DirecTV Now also making an impact.

The number of domestic traditional pay TV subs will fall from 100.3 million in 2012 to 80.3 million in 2023. Pay TV penetration will fall from 87.6% of TV households in apex year 2013 to 66.7% in 2023.

Although Canada is losing pay TV subs, its problems are not as severe as the United States. Pay TV penetration reached a highpoint in 2013 at 85.1%. The level will fall to 74.8% by 2023. However, the number of pay TV subs will be 11.2 million by 2023 – about the same as 2017. Pay TV revenue will fall from a peak of $6.8 billion in 2015 to $6 billion by 2023.

Pay-TV Operators Lost Nearly 1.5 Million Subs in 2017

Domestic pay-TV representing about 95% of the market lost about 1.49 million net video subscribers in 2017, compared to a pro forma loss of about 760,000 subscribers in 2016, according to new data from Leichtman Research Group. Traditional pay-TV services (not including Internet-delivered) lost about 3 million subs in 2017, compared to a loss of about 1.9 million subs in 2016.

The pay-TV providers account for 92.2 million subscribers — with the top six cable companies having about 48.1 million video subs, satellite TV services 31.5 million subscribers, telecoms 9.2 million subs, and online TV platforms with 3.4 million subscribers.

Leichtman said the top six cable companies lost about 660,000 video subs compared to a loss of 275,000 subs in 2016.

In 2017, the top cable providers cumulatively lost 1.4% of video subscribers — compared to a loss of 0.6% in 2016. Satellite TV services lost about 1.55 million subs in 2017 — compared to a loss of about 40,000 subs in 2016. DirecTV lost 554,000 subs compared to a gain of 1.22 million subs in 2016.

In 2017, DBS services cumulatively lost 4.7% of video subscribers — compared to a loss 0.1% in 2016

The top telephone providers lost about 885,000 video subscribers in 2017 — compared to a loss of about 1.59 million subs. AT&T U-verse lost 624,000 subs in 2017, compared to a loss of 1.35 million subs.

In 2017, the top Telcos cumulatively lost 8.7% of video subs, compared to a loss of 13.6% in 2016. The top (publicly reporting) Internet-delivered services added about 1.6 million subs in 2017, compared to 1.14 million net adds in 2016.

Subscribers to the top Internet-delivered services increased by 90% in 2017.

“Satellite TV services had more combined net losses in 2017 than in any previous year, yet these losses were offset by gains from their Internet-delivered flanker brands, such as DirecTV Now and Sling TV,” analyst Bruce Leichtman said in a statement. “Overall, the top pay-TV services lost 1.6% of subscribers in 2017 compared to a loss of 0.8% in 2016.”

 

Pay-TV Providers Subscribers at
End of 4Q 2017
Net Adds in
2017
Cable Companies
Comcast 22,357,000 (151,000)
Charter 16,997,000 (239,000)
Altice 3,405,500 (129,000)
Mediacom 821,000 (14,000)
Cable ONE* 283,001 (37,245)
Other major private company** 4,200,000 (90,000)
Total Top Cable 48,063,501 (660,245)
Satellite Services (DBS)
DIRECTV 20,458,000 (554,000)
DISH TV^ 11,030,000 (995,000)
Total DBS 31,488,000 (1,549,000)
Phone Companies
Verizon FiOS 4,619,000 (75,000)
AT&T U-verse 3,657,000 (624,000)
Frontier 961,000 (184,000)
Total Top Phone 9,237,000 (883,000)
Internet-Delivered
Sling TV^^ 2,212,000 711,000
DIRECTV NOW 1,155,000 888,000
Total Top Internet-Delivered 3,367,000 1,599,000
Total Top Providers 92,155,501 (1,493,245)

Sling TV Tops 2.2 Million Subscribers

Dish Network Feb. 21 announced that its Sling TV unit ended 2017 with more than 2.21 million subscribers – up 47% from 1.5 million subs at the end of 2016.

Launched in early 2015, Sling TV was the first standalone online TV service, offering access to 20 pay-TV channels priced from $20 monthly without a contract.

The service was the first to offer ESPN outside the pay-TV ecosystem. The concept was so new (Disney licensed ESPN as an experiment) that a blank screen aired during commercial breaks – underscoring marketers’ unfamiliarity with the distribution channel.

Today, online TV represents an alternative to cord-cutters and ongoing erosion of pay-TV households in the Netflix-fueled, over-the-top video era.

Other online TV platforms include PlayStation Vue ($40-$75), DirecTV Now ($35-$70), Spectrum TV Plus ($30), YouTube TV ($40), Hulu With Live TV ($40), FuboTV ($45) and Philo TV ($16).