Kagan: 37% of Broadband Homes Have Dropped Pay-TV

Pay-TV continues to lose appeal among Internet-connected (broadband) homes in the U.S. New data from Kagan, a unit of S&P Global Market Intelligence, found that 37% of broadband homes have cut the cord with traditional cable, telco or satellite TV distribution. That’s up from 12.5% of broadband homes six years ago.

The percentage of U.S. households without pay-TV service now hovers around 30%. In 2015, there were almost 100 million pay-TV households, a number that dropped to 86 million in 2019.

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Notably, the number of broadband-enabled homes has increased 80% from 2019 to 2020 due in large part to house-bound consumers cutting costs during the coronavirus pandemic.

“Given the economic headwinds of the first half, U.S. households likely were looking to cut back on discretionary spending, including entertainment,” analyst Tony Lenoir wrote in a note.

Cable Group: Consumers Saved $2 Billion in Electricity Costs Moving Away From Standalone DVR

Consumers saved nearly $2 billion in electricity costs in 2019 as a result of the voluntary set-top box energy efficiency agreement among pay-TV operators, according to NCTA — the Internet & Television Association trade group.

Working together with the Natural Resources Defense Council and the American Council for an Energy-Efficient Economy (ACEEE), pay-TV operators created more energy-efficient devices, including moving away from traditional DVRs, which help lower monthly electricity bills for consumers and contributed to less CO2 emissions into the environment.

A new report by independent auditor D+R International found that under the seven years of this agreement, national set-top box energy consumption decreased by nearly half (46%), yielding cumulative savings of more than $7 billion in electricity costs and avoiding nearly 39 million metric tons of CO2 emissions.

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The energy saved during this period is equivalent to the electricity used by all homes in the state of California for more than seven months, and the ongoing annual reduction in electricity demand is nearly equivalent to the power generated by five typical 500 megawatt coal-run power plants.

“By going above and beyond their voluntary commitments, pay-TV providers nearly doubled the $1 billion annual savings projected when the industry established its successful partnership with NRDC and ACEEE in 2013,” Neal Goldberg, General Counsel of the NCTA, said in a statement.

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Doug Johnson, VP of technology policy with the Consumer Technology Association, said the video entertainment market has changed over the past decade as consumers increasingly watch video on connected devices beyond the TV and from Internet-delivered sources.

“The [collaboration] has enabled industry and energy efficiency advocates to stay ahead of these fast-paced changes and secure far more energy savings more quickly than could have resulted from traditional regulation,” Johnson said.

D+R’s report, which is based upon multiple levels of independent verification tests and audits, found that the average power usage of a new digital video recorder (DVR) has decreased by 50% since 2012 as a result of whole-home architectures and cloud-based content storage.

Consumers used more than 43 million customer-owned devices such as Smart TVs, smartphones, tablets, personal computers, and streaming devices such as Apple TV, Roku, Google Chromecast and Amazon Fire to access the signatories’ video services via apps in 2019, which reduces demand for pay-TV set-top boxes.

D+R compiled these findings by reviewing data on every 2019 new set-top box purchase by all of the major pay-TV providers serving 94 percent of the U.S. market, including AT&T/DirecTV, Comcast, Charter, Dish Network, Verizon, Altice, Cox Communications, and Frontier.

Parks: 62% of Broadband Homes Still Have Pay-TV

Despite finding high-speed Internet service in almost every home, with weekly video consumption up more than 37 hours per household, new data from Parks Associates contends 62% of U.S. broadband households still subscribe to a traditional pay-TV service, down from 69% in Q1 2019.

“The explosion of online viewing options and video consumption came at the same time many shelter-in-place orders were enacted,” research director Steve Nason said in a statement.

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Nason said as households rely more on OTT services, the spike in online video consumption and decrease in linear-only households, the gap between OTT and traditional pay-TV is widening.

“Traditional services are looking to migrate to the cloud to get the best of pay-TV and OTT,” he said.

Nuno Sanches, GM, media & telecom at New York-based software company Kaltura, said the paradigm shift in the pay-TV consumption underscores the benefits of putting cloud-based TV at the heart of the ecosystem. He says cloud TV combines the agility, speed, and multiscreen usability of OTT, with the reliability, robustness and scale of pay-TV.

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“Just five years ago it was considered impossible to deliver operator-grade service from the cloud,” Sanches said. “The economics was perceived to be too expensive, and it seemed that telecom operators would not accept the perceived loss of control involved in utilizing the open Internet to deliver pay-TV services. But today, we have multinational pay-TV operators embracing online TV.”

In a Switch: Charter Adds 102,000 Spectrum Video Subs in Q2

In a switch, Charter Communications July 31 announced it added 102,000 Spectrum video subscribers in the second quarter, ended June 30. That compared with a loss of 150,000 video subs in the previous-year period. Charter ended the period with 15.6 million video subs — down 150,000 subs from 15.8 million subs a year ago.

The video additions counter an industrywide trend that has seen major pay-TV operators such as Comcast and AT&T hemorrhage subs to alternative distribution channels, including over-the-top video.

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CEO Tom Rutledge

In prepared comments, CEO Tom Rutledge gave no reason for the video turnaround, except to heap praise and moral support for the good fortune.

“Our ability to grow our services this year for new and existing customers, is a testament to our operating strategy, the quality of our products and our significant investment in systems and people over the last several years,” Rutledge said in a statement.

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To its credit, Spectrum was one of the first pay-TV operators to offer broadband-only subs online TV access through Spectrum TV Plus, which included a free Roku player.

Like other pay-TV operators, Charter is offsetting video uncertainty with high-speed Internet. With SVOD and AVOD platforms reliant on broadband distribution into consumer homes, Charter added 842,000 Spectrum Internet subs in the quarter — up 281% from 221,000 sub ads in the previous-year period. Charter, like Comcast, now has more broadband subs (26.3 million) than video.

“We continue to perform in a difficult and disruptive environment, and all of us at Charter are proud of our work in serving the communities in which we operate,” Rutledge said.

Comcast Loses Record 477,000 Pay-TV Subs in Q2, Adds Most Broadband Subs in 13 Years

As expected, Comcast legacy cable pay-TV business represents a widening economic fissure, losing 477,000 pay-TV subscribers in the second quarter, ended June 30. That was more than double the 224,000 video subs lost in the previous-year period. The cable giant has lost more than 1.2 million video subs in the past 12 months as consumers increasingly turn away from linear TV to over-the-top video distribution, including SVOD and AVOD.

Offsetting the video losses is high-speed Internet, which counts Comcast as the largest ISP in the country. With high-speed Internet a prerequisite for OTT video, Comcast had the best second quarter high-speed Internet net adds in 13 years, adding more than 340,000 broadband subscribers compared with 182,000 in the previous-year period. That does not include more than 600,000 free “Internet Essentials” customers that are receive service during the coronavirus pandemic, but were not included in reported results because they do not pay for the access.

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Comcast has added more than 1.6 million broadband subscribers in the past 12 months, to end Q2 with 29.4 million subscribers.

“We are optimistic about the runway ahead,” Comcast CEO Brian Roberts said on the fiscal call.

Roku: MLB Return Not Driving Pay-TV Viewership

The return of Major League Baseball during the coronavirus pandemic hasn’t resulted in a return to pay-tv, according to new data from Roku. The streaming media device manufacturer/distributor, citing internal research, found that 70% of households that watched baseball in 2019 did not tune in to watch the 2020’s delayed season opening weekend.

A loss of live sports due to COVID-19 is the primary reason 25% of survey respondents said they have dropped pay-TV. Just 20% of those subscribers said they would re-new pay-TV with the return of live sports. The findings counter claims by Disney-owned ESPN and Fox Sports about record opening weekend baseball ratings.

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“The return of MLB was a swing and a miss when it comes to viewership for traditional linear TV as less than one third of baseball’s 2019 household audience tuned in to watch any of the opening week games on linear television,” Gaurav Shirole, director of audience measurement at Roku, said in a statement.

Shirole believes that as live sports returns, fans have found new ways to consume it via video streaming services such as MLB.tv, the SVOD platform affording subscribers out-of-market games live or on-demand.

“Blacked out games are typically available to stream about 90 minutes after their conclusion,” he said.

Other MLB streaming sources include YouTube TV (a sponsor of last year’s World Series), Sling TV, Hulu with Live TV, AT&T TV Now and fuboTV, among others.

Games are also broadcast across a variety of channels, including ESPN, ESPN2, FOX, FS1, TBS, MLB Network and regional networks including NBC Sports and Fox Sports.

AT&T Posts 886,000 Q2 Video/OTT Sub Loss; Broadband Declines Too

AT&T says the bulk of its pay-TV subscriber woes is behind it. The numbers tell a different story. The media giant July 23 said it lost 886,000 video subs in the second quarter (ended June 30), which is a slight improvement from the 897,000 subs lost in the first quarter.

The decline included 68,000 AT&T TV Now online TV subs, about half of the 138,000 subs lost in Q1. The online TV segment ended the quarter with 720,000 subs — down from 1.3 million during the previous-year period. AT&T ended Q2 with 18.4 million video connections compared to 22.9 million on June 30, 2019.

Incoming CEO John Stankey continues to paint a rosy future, saying the company’s “resilient cash” from operations continues to support investments in growth areas, dividend payments and debt retirement.

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“We are aggressively working opportunities to sharpen our focus, transform our operations and continue investing in growth areas, with the customer at the center of everything we do,” Stankey said in a statement.

Regardless, as pay-TV operators continue to lose video subs to alternative channels, including over-the-top video and SVOD, they have rebounded through the growth in high-speed Internet — a prerequisite to broadband video access.

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Yet, the telecom said it lost 79,000 broadband subscribers to end the period with about 13.9 million connections. That compared with 14.4 million subs on June 30, 2019. Broadband net losses included 159,000 disconnections where nonpaying subscribers are receiving service under the “Keep Americans Connected Pledge” AT&T rolled out during the ongoing coronavirus pandemic.

AT&T said Entertainment Group revenue (which includes pay-TV units DirecTV and AT&T U-verse and OTT) dropped 11.4% to $10.1 billion, reflecting continuing declines in video subs, legacy services and lower advertising revenue, which were impacted by lower spend attributable to COVID-19.

Revenue declines were partially offset by higher pay-TV and OTT video ARPUs. Entertainment operating expenses totaled $9 billion, down 8.3% versus the second quarter of 2019, largely driven by lower content costs resulting from fewer subscribers, lower marketing costs and ongoing cost initiatives, partially offset by annual content rate increases, higher amortization of fulfillment cost deferrals, including the impacts of second quarter 2020 updates to decrease the expected subscriber lives and pandemic-related bonus payments to front-line employees and contractors.

Parks: 54% of U.S. Broadband Homes Own a Smart TV

It’s an over-the-top video world. So, it’s not a surprise that new data from Parks Associates June 24 finds more than 50% of U.S. broadband households own at least one smart TV, making the Internet-connected TV the primary platform for video streaming services at a time when content consumption is increasing dramatically.

Dallas-based Parks found that from Q1 2019 to Q1 2020, more than six million domestic broadband households cut the cord on their traditional pay-TV service, primarily transitioning to OTT services or broadcast TV via antennas for video content.

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The COVID-19 crisis further changed how households consume video from both a device and service perspective, and its impacts will continue even as states lift shelter-in-place orders, according to Parks. U.S. broadband households are consuming on average more than 20 hours of video content weekly on the TV, an increase of nearly 40% from 2017.

“Nearly one-third of U.S. broadband households cite a smart TV as their primary streaming video device, nearly double the rate of streaming media players and computers,” research director Steve Nason said in a statement. “When looking specifically at online video content, the smart TV is the only measured device seeing a year-over-year increase as the primary streaming video device,” Nason said.

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The analyst said smart TV continues to improve its perceived value to consumers across a variety of key features and technologies.

[The units] are steadily improving their scores in ease of navigation and ability to find content or discover new apps, supplanting other video devices in the house to become the main source for video content,” he said.

Parks said improved user features come at an important market inflection point, where consumers are watching more video at home while also cutting the cord on pay-TV, leaving them to search for content on their own, across multiple services.

“We’ve seen broadcasters incorporate smart TVs and connected devices more and more into their app strategy, and those that have are seeing a huge uptick in overall consumption and user engagement,” said Jonathan Laor, co-founder/CEO, Applicaster, which assisted Parks with the research. “Over the past few months we’ve also seen end users going to their mobile devices for subscribing to new services, and a dramatic increase in their consumption on TVs, making TVs the new champions of viewer retention.”

CFO: Comcast Looking at Near 400,000 Video Sub Loss in Q2

The NBCUniversal Peacock streaming video service can’t come fast enough. Comcast Cable is expecting the same quarterly pay-TV subscriber loss in the second quarter (ending June 30) as it had in Q1: more than 388,000 subscribers dropping service.

That’s the projection Comcast Corp. CFO Michael Cavanaugh revealed June 16 during the virtual Credit Suisse Communications Conference.

“We’ve seen a lot of consumption of television, but a continued shift to streaming,” Cavanaugh said. “Our expectation is that the amount of spread [pay-TV sub losses] year-over-year will be about the same in the second quarter versus a year ago as it was in the first quarter.”

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Cavanaugh said the sub loss isn’t a surprise in light of ongoing consumer migration toward over-the-top video from the traditional cable bundle. He said the previous business model around channel bundles has been supplanted by high-speed Internet, data and video distribution.

“Today, we look at video as important because it’s a customer need and because we’re the broadband provider … helping in an ever more streaming world and helping customers navigate the video that they choose to buy,” he said.

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Cavanaugh said the days of forcing consumers to purchase bundles of content they may not watch are over.

“We’re not going to force it upon you if you don’t choose to see it that way,” he said.

To quell pay-TV drain, Comcast, through its cloud-based Xfinity platform, has pushed toward melding linear TV offering with over-the-top distribution such as Xfinity Flex, which enables subs to stream more than 10,000 free movies and TV shows, access services such as Netflix, Amazon Prime Video, HBO and Showtime, and rent or purchase movies and shows.

NBCUniversal launches its subscription/ad-supported Peacock streaming service nationwide on July 15.

“With impact on cord cutting, where we’re going with Flex in the cable business,” Cavanaugh said. “When combined with a voice remote, we think its very powerful, a platform attached to the broadband product.”

“I think there are a lot of pieces of our pre-existing [pay-TV] strategies and the momentum we had going into all this that I think is making us feel pretty confident in the future.”

Comcast reports Q2 results on July 30.

COVID-19 a Push to Cut the Cord

During the pandemic, consumers are sitting at home looking for more visual entertainment than ever before — and evaluating their options. Happily, the disc has gotten a lift as consumers realize the value of the stalwart format, while digital transactional retailers have gained in part by offering premium VOD titles that bypassed or left theaters early.

But, in addition to theaters, one entertainment option that may suffer from COVID-19 is traditional cable, satellite or telco pay-TV. A study from TDG Research found that as virtual MVPD services re-create the offerings of traditional pay-TV, consumers are increasingly seeing less of a need for it. “Most OTT pay-TV services now provide a full complement of both broadcast and cable channels” said analyst Michael Greeson.

Indeed, I am finding it increasingly annoying to sit through commercials on cable that last longer than ads on any AVOD offering and don’t include that convenient countdown to tell you when the torture will end. After scrolling through the numerous cable channels and finding absolutely nothing I want to watch, I am jumping to smart-TV options more and more. The family wants to cut the cord, and the time may be right.

As TDG noted, vMVPD leaders Hulu Live TV and YouTube TV offer the four major broadcast networks, channels that previously helped tie consumers to traditional pay-TV.

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It’s ultimately a flight to quality and value, the same things that have bolstered the transactional home entertainment business since its beginning.