Linear video subscriber losses hit 2.1M in Q1, with vMVPDs losing 201K – analyst

The first quarter of 2022 was not – to say the least – rosy for the linear video industry. In fact, the industry collectively lost an estimated 2.1 million subscribers across cable, satellite, telco and almost all virtual MVPDs, according to a new report from MoffettNathanson.

Total net losses for the linear video industry marked “the worst quarter since the COVID sports (and jobs) blackout in Q1 2020,” wrote analyst Craig Moffett, with the industry shrinking 5.1% year over year.

The firm highlighted three “strikes” working against the linear pay TV business: one being that Moffett doesn’t see a linear schedule as best suited for consuming unscripted/pre-recorded entertainment content; two, media companies shifting their best content from cable networks to direct-to-consumer platforms; and finally, continued price increases in the face of subscriber losses.

“Both strategies have alienated distributors, who are now more ambivalent than ever about trying to retain video subscribers who are themselves increasingly ambivalent about lower and lower quality video services for which they are asked to pay higher and higher price,” the report stated.

The rate of decline for traditional video distributors stayed around 9% in the quarter (“the worst it has ever been” per the report), where collective losses reached 1.86 million in the first three months of the year, encompassing players like DirecTV, Comcast, Charter and others. Traditional TV providers ended the period with about 66 million subscribers. Meanwhile, virtual MVPDs like Sling TV and Hulu don’t appear to be picking up the slack.

vMVPDs not making up for traditional subscriber losses

Virtual MVPDs offer a bundle of cable linear channels, similar to a lineup from a traditional pay TV provider but at a lower price point than satellite or cable. However, most of those leaving traditional aren’t switching to vMVPDs.

The MoffettNathanson Q1 2022 Cord Cutting report showed that along with continued traditional declines, the rate of conversion - or people who leave traditional video providers for paid streaming linear TV – decreased to near all-time lows. The report also found much more seasonality among those who are subscribing to pay TV.

“There’s not a lot of good news here,” Moffett said of U.S linear video subscribership.

By MoffettNathanson estimates, less than one in three disconnects from cable or satellite is going to a virtual provider. The total number of cord-cutting or cord-never households has grown to 45 million, and with only a third of those shifting to vMVPDs, more than 30 million households are “entirely outside the cable network ecosystem.”

For the first quarter 2022, the firm estimates vMVPDs lost around 201,000 subscribers, ending the period with a total of 14.9 million subscribers, up 16.7%. Dish’s Sling TV was the worst performer in Q1, losing an estimated 234,000 net subscribers – followed by Hulu Live which lost 200,000, per the report.  DirecTV Now excluding free trials recorded net losses of 18,000 while sports-centric FuboTV lost around 74,000, according to MoffettNathanson.

YouTube TV and Hulu are among the largest vMVPD and Moffett signaled losses at the latter were offset by YouTube TV gains of 300,000 in the quarter. Still, those YouTube TV gains didn’t outpace the collective losses in the vMVPD ecosystem. On Tuesday YouTube TV disclosed surpassing the 5 million user mark, including accounts in a free trial period.

The firm attributed the erosion in linear TV to a loss of value proposition, particularly compared to SVOD and increasingly AVOD.

Pricier plans are part of the equation as vMVPDs have continued to increase rates. The report noted that “in just over four years, the price of most of the major vMVPDs services has nearly doubled.”

For example, Moffett pointed out that fuboTV’s lowest price plan is now $70 per month, after it stopped offering a $65 per month Starter plan to new customers this March. That compares to a $45 per month price tag three years ago.

Other vMVPDs have similarly raised prices, the report noted.

Hulu + Live TV instituted a $5 per month price hike at the end of 2021, bringing its rates up to about $70 per month and $75 per month for the service with no ads (those are for plans that include Hulu SVOD). The Hulu Live TV Only plan increased to $69 per month. Those changes came about one year after an earlier $10 per month price hike from Hulu. In 2019 Hulu was charging about $45 per month for its live streaming TV service.

Sports and news might not save linear TV

Potentially adding to the linear TV industry’s woes are changes in the sports world and an increasingly fragmented ecosystem of where to find sports content as more moves to streaming.  

Along with news, live sports programming had been seen by the firm as a floor to buoy the pay TV industry and help stem steeper cord-cutting subscriber losses. MoffettNathanson questioned if sports and news will end up being able to fortify the pay TV industry as the firm had always expected.

“Here too, forces are conspiring to erode the grip that sports sand news have traditionally held over the Pay TV model,” the analyst stated. “Regional sports networks are disappearing form the line-ups of traditional and virtual MVPDs, narrowing distribution and undermining the ability of franchises to grow new fans.”

It noted high costs of RSNs have resulted in more distributors dropping them (such as Dish Network not bringing on Sinclair’s Bally Sports RSNs after reaching a new carriage deal for broadcast channels last year.)

At the start of June NESN became the first regional sports network to launch its own direct-to-consumer streaming service, while Sinclair late last month soft launched a Bally Sports Plus DTC streaming apps for the regional sports networks.

“Without RSNS, the national sports networks like ESPN are isolated; alone they don’t provide enough sports to retain die-hard fans,” wrote Moffett.

The firm also pointed to streamers like Apple and Amazon scooping up sports rights. Apple earlier this year secured Friday Night Baseball rights, and recently signed a 10-year deal with Major League Soccer to stream all live games. Amazon meanwhile is the exclusive home of NFL’s Thursday Night Football, starting in September. And Apple and Amazon both are among those vying to secure NFL Sunday Ticket rights.

“With an NBA TV negotiation looming in the not-so-distant future, it is getting harder to argue that a core sports base will remain when more and more sports programming is leaking out of the system,” wrote Moffett.