New Study Says 40% Of American Households Will "Cut The Cord" By 2030

Cord cutting is a topic which we discuss on a fairly regular basis, particularly over the last several quarters as the subscriber losses for cable companies have seemingly accelerated (see: Cord-Cutting Accelerates, Sends Shock Wave Across Traditional TV).  Not surprisingly, one of the biggest losers of the cord cutting phenomenon has been ESPN, a media giant that ironically was one of the largest, if not the largest, beneficiaries of the cable TV bundle since it made its debut in 1979 (see: ESPN Lost 15,000 Subscribers A Day In October).

Of course, as TDG Research notes this morning, the wave of Americans electing to forego the massively overpriced cable TV bundle is only getting started and will see some 40% of American households ditch their service by 2030.

Generally, TDG expects that the penetration of live multi-channel pay-TV services will decline from 85% of US households in 2017 to 79% in 2030. While statistically a loss of only 7%, it nonetheless illustrates the ongoing secular decline of a once healthy market space. TDG predicts that, by 2030, roughly 30 million US households will live without an MVPD service of any kind, be it virtual or legacy.

 

During this time, legacy MVPDs will experience considerable subscriber losses, due not only to long-term industry trends but also growing competition from virtual pay-TV providers. Consequently, legacy pay-TV penetration will fall from 81% of US households in 2017 to 60% in 2030, down 26%. At the same time, virtual pay-TV penetration will grow from roughly 4% of US households to 14%, up 350% but from a very small base.

 

"TDG said early on that the future of TV was an app. Unfortunately, most incumbent MVPDs weren"t taking notes," notes Joel Espelien, TDG Senior Analyst. "The question is no longer if the future of TV is an app, but how quickly and economically incumbents can adapt to this truth and transition to an all-broadband app-based live multi-channel system."

As the Pew Research Center noted over the summer, while part of the cord cutting story is attributable to the growing availability of quality streaming content, another component is a simple demographic transition with only 30% of millennials aged 18-29 saying they subscribe to cable versus 61% with a streaming subscription.

About six-in-ten of those ages 18 to 29 (61%) say the primary way they watch television now is with streaming services on the internet, compared with 31% who say they mostly watch via a cable or satellite subscription and 5% who mainly watch with a digital antenna, according to a Pew Research Center survey conducted in August. Other age groups are less likely to use internet streaming services and are much more likely to cite cable TV as the primary way they watch television.

 

• Women are more likely than men to say their primary way of watching TV is via cable subscription (63% vs. 55%).

 

• Men are more likely than women to say their primary pathway is online streaming (31% vs. 25%).

 

• Those with a college education or more are more likely than those with less education to say their primary way to watch TV is online streaming. Roughly a third of college-educated Americans (35%) say they mainly watch via streaming, compared with 22% of those who have a high school diploma or less.

 

• Those in households earning less than $30,000 are more likely than others to say they rely on a digital antenna for TV viewing. Some 14% say this, compared with just 5% who live in households earning $75,000 or more.

Of course, many people wrongfully interpret the death of the cable TV bundle as a precursor the imminent demise of cable companies overall...but, as we pointed out in a post entitled "Streaming Killed The Cable Bundle: Record 941,000 Pay-TV Customers Ditch Cable In Q2," nothing could be further from the truth as the real losers will be the weaker content providers who won"t have enough of a draw to sell their content direct to consumers when the channel bundle goes away.  Meanwhile, the cable companies will make out just fine as they will still control the fastest internet connections into the home which will become even more valuable to data-hungry consumers.

We"ve long held the opinion that the content creation and media distribution businesses are on the precipice of a major transformation.  Since the birth of cable TV, content creators (think Disney, Discovery, Scripps, AMC, etc.) have been locked in a perpetual tug-of-war with distribution companies (Comcast, Charter, Verizon, AT&T, etc.).  Up until now, content creators have been the clear winners as they"ve continued to force cable companies to carry their growing lineup of channels, many of which are awful, by effectively holding their good content hostage until distributors agree to pay for channels that they (and their customers) likely don"t want.  As an example, a company like Scripps may refuse to sign a distribution agreement with Charter for HGTV or the Food Network, unless they also agree to pay for their less popular channels like TVN, Fine Living or the Asian Food Channel.

 

All of which is precisely why cable customers have ended up paying for 1,000 channels when they really only watch about 5 of them.

 

But, that is all changing with the onset of direct-to-customer streaming.  HBO was the first to blink, then came ShowTime and now Disney has just announced that ESPN will also go direct.  What this means, of course, is that increasingly people will be able to make a la carte purchases of the media they actually value and ditch all the "crap" that clever content creators have forced down our throats for years by holding their desired content hostage.

In summary, just like "Video killed the Radio Star," streaming has just killed the cable bundle.

Pay-TV Companies Tank As Subscriber Losses Surge To Record Highs In 2017

As the broader markets casually melt-up to new record highs with each passing day, one small corner of the equity market is in full on meltdown mode: cable and satellite pay-tv providers.  Down anywhere from 3-10% on the week, investors in this space seem to be finally admitting that record subscriber losses, quarter after quarter, just may end up being a bad thing.

As Bloomberg points out this morning, pay-tv subscriber losses are expected to set a new record in 2017, surpassing the 1.7mm homes that "cut the cord" in 2016, as industry analyst Craig Moffet warns "it is becoming increasingly clear that the wheels are falling off..."

Barring a major fourth-quarter comeback, 2017 is on course to be the worst year for conventional pay-TV subscriber losses in history, surpassing last year’s 1.7 million, according to Bloomberg Intelligence. That figure doesn’t include online services like DirecTV Now. Even including those digital plans, the five biggest TV providers are projected to have lost 469,000 customers in the third quarter.

AT&T sank 6.1 percent, the biggest one-day loss since November 2008. Dish, which also provides satellite service, declined 5.1 percent. Viacom dropped 2.5 percent while AMC Networks Inc. fell 6.8 percent after Guggenheim Securities LLC downgraded the two stocks to neutral from buy.

Dallas-based AT&T is pushing headlong into TV programming by acquiring HBO and CNN owner Time Warner Inc. in an $85.4 billion deal. Chief Executive Officer Randall Stephenson has argued that the acquisition will let AT&T create compelling video packages for mobile subscribers and provide valuable targeting information for advertisers.

“It is becoming increasingly clear that the wheels are falling off of satellite TV,” said Craig Moffett, an analyst at MoffettNathanson LLC, in a research note.

AT&T set off the selling panic earlier this week when they announced they would lose 390,000 pay-tv customers in 3Q 2017 alone.  As a reminder, AT&T purchased DirectTV for $48.5 billion just 3 years ago...something tells us shareholders might like a "do-over" on that colossal misallocation of capital.

AT&T, whose ownership of the DirecTV satellite service makes it the biggest U.S. pay-television provider, said late Wednesday it will report a third-quarter loss of 390,000 satellite and cable customers, echoing a similar warning weeks earlier from Comcast Corp. The same night, Viacom cautioned that its distribution deal with Charter Communications Inc., the second-biggest cable U.S. company, may lead to a blackout, potentially testing whether millions of viewers are willing to go without MTV and Nickelodeon.

Shares of both companies retreated Thursday, contributing to a broader selloff in the sector. The S&P 500 Media Index, which includes Comcast and ESPN owner Walt Disney Co., slid 2.3 percent to the lowest level since December.

Meanwhile, the bigger question that remains to be answered is whether cable providers will finally use this customer backlash to push back on content providers who have managed to force ridiculous annual price increases down the throats of American consumers for decades...Citi analyst Jason Bazinet seems to think so...

After decades of steadily increasing bills and ever-bigger packages of channels, the pay-TV ecosystem is in full-blown crisis mode. AT&T, Dish Network Inc. and others are offering cheaper, online-only versions of cable to lure customers back, but that means having to accept thinner profit margins.

“Those salad days of fat bundles, automatic carriage renewals and customary affiliate steps ups are long gone,” Citigroup Inc. analyst Jason Bazinet wrote in a note this week. “Today, every media and cable firm is jockeying for self-preservation. And we suspect the next chapter in this new era means Charter will drop -- or significantly curtail -- distribution of Viacom’s content.”

Of course, some of these content owners are making the decision to drop the cable bundle much easier all on their own...

CNBC Viewership Drops To 22 Year Low

It appears that "subdued volatility" is hurting not only bank trading revenues. Two years after CNBC announced that it would no longer rely on Nielsen ratings to measure its daytime audience (just after we reported its viewership had tumbled the most on record), turning to rival Cogent Reports instead, the latest data reveals that the decline for the financial channel has continued, and in the past quarter CNBC delivered 152,000 total daily viewers, its lowest viewership since 1991 for the 28-year-old network.

At the time when CNBC switched away from Nielsen, it complained that the media tracking company failed to track "out of home" viewing in locations such as airports, gyms, restaurants and offices. Well, with all viewers taken into account, the picture, pardon the pun, deteriorated further, and in the past quarter, CNBC delivered its lowest rated quarter since 1991, and in total viewers, had its lowest rated quarter in 22 years, dating back to 1995

And while the reason for CNBC"s ongoing decline is unclear, an unexpected winner has emerged in Fox Business News, which continued its winning streak against CNBC by drawing more viewers for the fourth consecutive quarter, and in the last quarter average 187,000 total viewers across the business day (9:30am-5pm), up 26%, while the same category at CNBC saw a 14% decline to 152,000 total viewers. For the month of September, FBN averaged 195,000 total Business Day viewers, 23% higher than CNBC, which had 158,000 total viewers, which was its second lowest rated month ever.

It may come as a surprise to some, but "Lou Dobbs Tonight" continues to be the top-rated program on business television in both total viewers and in the 25–54-year-old demographic. Furthermore  Dobbs, a longtime CNN anchor before jumping to Fox Business in 2011, has led the way in total viewers on business TV for 57 straight weeks.

With markets hitting new record ignoring natural disasters like Hurricanes Harvey and Irma, and rising tensions with North Korea, FBN closed out the month of September with its 11th monthly win over CNBC. Curiously, CNBC remains the only business channel showing yearly declines, while all other networks have double-digit gains across the board for the year, notably down 14% in Business Day viewers over their performance last year, with 177,000 total viewers. 

We"ll leave it up to readers to come up with the reasons behind CNBC"s chronic decline.

DirecTV Will Allow Angry Customers To Request NFL Refunds

In the first reported case of corporate blowback involving the ongoing Trump vs NFL feud, the WSJ reports that DirecTV is letting some angry customers cancel subscriptions to its Sunday Ticket package of NFL games and obtain refunds "if they cite players’ national anthem protests as the reason", according to customer service representatives. While DirecTV"s regular Sunday Ticket policy doesn’t allow refunds once the season is under way, the representatives said they are making exceptions this season, which began in September, in response to the player"s growing protests, either kneeling or linking arms during the national anthem.

DirecTV service representatives contacted by The Wall Street Journal had different understandings of the policy. One said refunds to those concerned about the anthem protests were only offered to subscribers with certain offers or plans. One representative said full refunds were available for those who complained about anthem protests. Another said such people could only get prorated refunds for the remainder of the season.

While other representatives said the policy hadn’t changed and that no refunds were allowed for any reason, DirecTV subscribers contacted by the WSJ showed the satellite broadcaster was offering at least some refunds.

Marc Hoffman, a longtime subscriber to Sunday Ticket, which gives sports fans the ability to watch every Sunday game, said in an interview he was able to cancel his subscription and receive a refund on Monday. The package costs around $280 per season. “I honestly didn’t think I’d get a refund,” Mr. Hoffman said. “I know their guidelines, I just wanted to make a point.”

Chris Baker, who lives in Indiana, told the WSJ that he reluctantly canceled his Sunday Ticket subscription, but not precisely as a response to the protests. “I explained to them I was tired of politics in sports, and it’s not how I want to spend my Sunday, watching all that transpire,” he said he told a DirecTV representative. He said the representative “insinuated there was a high volume of calls calling in to cancel.”

The shift is the latest twist in a controversy that has divided the nation after President Donald Trump blasted players who took a knee during the anthem and said they should be fired. He has called on people to walk out of stadiums when players are kneeling.

To be sure, Trump added to the fire on Tuesday saying that “for people to disrespect that by kneeling during the playing of our national anthem, I think is disgraceful.”

While several teams have issued statements defending the rights of their players to express their opinion - and the NFL also has shown solidarity with them - the stakes are much higher, and go beyond just the political. As the WSJ reports, football draws the biggest TV audiences of American sports and is a vital income source for a host of major media companies. For DirecTV, Sunday Ticket is a major customer draw and one of the NFL’s premier franchises, earning it $1.5 billion a year in licensing revenue.

Aside from DirecTV, the NFL-owned channel RedZone, which provides live action and scoring from every game on Sundays, is also experiencing some cancellations due to the protests.

Chuck Plavk, a veteran who resides in Wisconsin, canceled his subscription to the channel from Charter Communications ’ Spectrum Cable. He said when he called, the customer service representative said, “everybody’s calling about that today.” Unlike Sunday Ticket, which is only available through DirecTV, RedZone is available through a number of cable providers and streaming outlets.

Needless to say, a spike in cancellations risk further damage to both viewership and revenues as the league tries to stem an ongoing decline in ratings. Viewership fell last year and, as Trump pointed out, continues to do so this year.

Network executives and league officials attributed last year’s declines in part to viewing competition from the presidential election, consumer distaste with the pace and quality of games.

And now, based on DirecTV"s announcement, one can add anthem protests to the list.

Are We Witnessing the Death Spiral of Cable Television?

Via The Daily Bell

Cable television has long been the coveted propaganda arm used to program American sentiments. But because of the internet, viewer choice for news, sports, and entertainment has proliferated. Content is becoming decentralized, and that makes it harder to control the attitudes of the masses.

Since 2013, pay tv subscriptions have been declining, losing more customers than they gain. Over one million people per year are fleeing from paying for cable TV from companies like Verizon, Time Warner, and Comcast.

For three straight years, the viewership of the Emmy’s has declined. Yet while cable networks broadcast the award show, original Hulu and HBO shows were winning the awards.

You don’t need a cable subscription to watch shows on Netflix, HBO Now, or Hulu. While Netflix and Hulu run some cable shows, they also produce their own content. This doesn’t automatically mean the content won’t be akin to the typical propaganda on cable. But it does mean that control over programming is more decentralized. This includes the FCC’s slipping grip, as they have thus far failed to seriously regulate online programming.

Now consumers have a choice. Youtube offers even more choices which allow independent and much smaller content producers to disseminate their shows. Owned by Google, there is plenty to criticize when it comes to Youtube. They arbitrarily remove certain content that they don’t like. But this will just bolster alternatives like Vimeo and DailyMotion.

Amazon also offers subscription programming that goes along with their Prime program. Like Netflix, they are investing in making their own TV shows and movies to better compete with all the alternatives. An Amazon Prime 30-Day Free Trial lets you see what they got before committing.

And whatever issues you may have with companies like Youtube and Amazon, there are now plenty other options available, with more coming.

An exciting new startup called BadMirror.tv will soon go live. The company aims to tackle programming from a community perspective. They offer “hyperlocal broadcasting” that is boosted based on popularity but always starts locally. BadMirror.tvseeks to reconnect people to their community so that a handful of big executives–and whoever is influencing them–can’t centralize control over content, and decide what will be popular.

Pride comes before the fall.

A user base can vanish quickly when customers no longer get what they want from a business, and have plenty of alternatives.

And we should expect viewers to go elsewhere as their favorite content starts leaving a bad taste in their mouth. For years, football has enjoyed tremendous ratings, insulated from the decline of other cable programming. But viewers have recently been turned off by excessive political correctness from the NFL, as well as protest displays from pro-football players which many view as unpatriotic and disrespectful to law enforcement.

Overall viewership for the 2016 NFL season was down 8% per game, an average of 1.4 million fewer viewers per game compared to 2015. So far in the 2017 season just beginning, there has been a 14% decline in viewership.

The kicker is that football has been counted on by Cable networks to save television. Sports games are still better watched live since hearing the score for a recorded game is a major spoiler. When you watch live, it is harder to get around the commercials. But people aren’t watching football as much, not even on alternative providers. The NFL has overplayed its hand in delving into politics.

The good news is, as an individual, you don’t have to be affected by Cable TV one way or the other. You have the power to simply choose alternatives that don’t play into the machine of manipulation, fear, and drivel.

Of course, another great alternative is to read books for entertainment. Go full Farenheight 451, reject the screens which take up whole walls of the living room, and become a literary outlaw.