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.

Report: Post COVID-19, SVOD Use to Remain Strong

During the peak of the coronavirus pandemic, use of subscription video-on-demand services reached 56% in domestic homes. New data from TransUnion says that percentage should remain around 45% as economies and businesses re-open.

As consumers’ use of paid streaming services such as Amazon Prime, Hulu, Netflix and Apple TV increases, so too has the amount of time spent on the platforms. The report found daily use on platforms increased from upwards of two hours daily prior to the pandemic to an average upwards of four hours through May 18.

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More than 30% of consumers surveyed spent at least five hours daily streaming media. Among 18- to 29-year-olds, daily SVOD use skyrocketed 66%.

“The use of digital platforms has accelerated as younger generations seek more control and flexibility over how they consume content,” Matt Spiegel, EVP and head of the media vertical at TransUnion, said in a statement.

Spiegel said consumption is occurring across multiple channels and devices as consumers shift away from traditional pay-TV cable and broadcast.

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Consumers subscribing to three to five streaming services increased to 48%, up from 37% prior to COVID-19. Another 53% of survey respondents said they use a streaming service in place of a pay-TV bundle.

TransUnion found that Internet-connected televisions are the most popular streaming device with 37% of respondents. The 18–29 age group also preferred mobile devices (25%) for streaming while the 30–44 demographic had a preference for OTT devices (19%).

Older demos (60+) favored Smart TVs (41%), followed by desktop computers. However, streaming as a whole may still be a fairly new concept as 19% indicated they do not stream content at all.

“As more consumers leverage digital channels and look for entertainment options in the comfort of their homes, it’s important to take a pulse check as to how consumer behaviors are changing — and have changed since the onset of the pandemic,” Spiegel said. “These insights will be instrumental to advertisers as they adapt their positioning and targeting in the marketplace to create more relevant experiences.”

Cable TV Could Lose $1 Billion in Hidden Fees Revenue

Hidden fees on the typical pay-TV bill are the secret sauce that pad cable operators’ bottom line and state and local government coffers.

The average cable bill includes $37.11 worth of added monthly fees (excluding $13.28 in taxes) that aren’t part of the advertised package price, according to new data from KilltheCableBill.com. A separate report from Decision Data found the average domestic cable bill is about $217 monthly.

With nearly 600,000 video subs canceling service in the first quarter (ended March 31), the report contends pay-TV operators lost more than $22 million in revenue per month, which could result in $265 million for the year if cord-cutting trends continue. That revenue loss could skyrocket to $1.5 billion if video sub losses balloon.

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At the same time, the surge in over-the-top video platforms charging flat monthly fees of $15 or less continues. Netflix alone added more than 15 million subscribers in the quarter.

“The fact is that Q1 was devastating to cable companies, and I think that we’ll see when Q2 stats come out and a full quarter of quarantine has finished that the [coronavirus] pandemic just might be the final straw for cable TV as we know it,” analyst William Parker wrote in the report.

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COVID-19 Driving Cord-Cutting — at Online TV

When Dish Network launched Sling TV in 2015, it represented pay-TV’s answer to the pricey cable bundle and Netflix. Competitors such as Sony PlayStation Vue, Hulu with Live TV, DirecTV Now quickly joined the party. But the industry shine seems to be fading.

Speculation U.S. consumers quarantined in their homes would temporarily stem pay-TV cord cutting was dispelled with the industry’s largest first-quarter decline for traditional multichannel subscriptions. At two million, it was the largest quarterly drop to date.

New data from media research group Kagan estimates it was also the first quarterly decline for virtual multichannel alternatives. The broadband-delivered services collectively lost 261,000 subs or 2.8% to finish the quarter with 9.2 million subs.

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Gains from Hulu with Live TV and YouTube TV were erased by the declines from Sling TV and AT&T TV Now (formerly DirecTV Now) as well as Sony’s decision to shutter PlayStation Vue in January.

By comparison, subscriptions to traditional cable, direct broadcast satellite and telecommunications video services dropped 2.4% in the quarter.

As a result, Kagan updated its forecast for video market share in the U.S. due to mounting unemployment and the COVID-19 economic downturn. The revised projections suggest broadband-only households to surpass combined traditional and virtual multichannel subscribers. Indeed, online TV services have narrowed their cord cutter appeal and are expected to account for less than 10% of occupied households and reach nearly 11 million by the end of the year.

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Meanwhile, broadband homes are increasingly satisfying home entertainment needs through a combination of free and subscription-based streaming services, including adding 24.7 million subs by the end of 2020, accounting for more than 19% of occupied households.

“Home isolation should have stemmed multichannel defections, but the cruel irony of the interruption in programming and ensuing economic turmoil is expected to blunt the benefits,” Kagan wrote in a note. “We forecast an 11% drop in traditional multichannel subscriptions in 2020, and penetrations of less than 56% at the end of the year.”

Verizon CEO: 800,000 Subs Can’t Pay Their Monthly Bill

Fallout from the economic shutdown across the country due to the coronavirus pandemic continues to reverberate with millions more filing for unemployment and not being able to pay their bills.

Verizon CEO Hans Vestberg, appearing May 14 on CNBC’s “Squawk Box,” said about 2.5% of the telecom’s subscribers (about 800,000) can’t pay their monthly bill.

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“The majority of them already had a credit history with us … and we saw some challenges for them to pay their bills [due to the pandemic],” Vestberg said.

The executive said there has been a slight improvement (“not substantial”) in the past two weeks as the economy slowly jumpstarts operations and customers feel less stressed meeting financial obligations.

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“At least it’s not going in the other direction,” Vestberg said. The telecom earlier this month inked a distribution deal with ViacomCBS’s ad-supported VOD platform, Pluto TV.

Last month, Verizon disclosed it lost 84,000 Fios TV pay-TV subscribers in the first quarter ended March 31. The loss, which mirrored ongoing secular changes within the premium television ecosystem, was up more than 52% from a loss of 55,000 subs in the previous-year period.