Category Archives: Satellite

Cord Cutting in Q3 2016

I do a piece most quarters after the major cable, satellite, and telecoms operators have reported their TV subscriber numbers, providing an update on what is at this point a very clear cord-cutting trend. Here is this quarter’s update.

As a brief reminder, the correct way to look at cord cutting is to focus on three things:

  • Year on year subscriber growth, to eliminate the cyclical factors in the market
  • A totality of providers of different kinds – i.e. cable, satellite, and telco – not any one or two groups
  • A totality of providers of different sizes, because smaller providers are doing worse than larger ones.

Here, then, on that basis, are this quarter’s numbers. First, here’s the view of year on year pay TV subscriber changes – a reported – for the seventeen players I track:


As you can see, there’s a very clear trend here – with one exception in Q4 2015, each quarter’s year on year decline has been worse than the previous one since Q2 2014. That’s over two years now of worsening declines. As I’ve done in previous quarters, I’m also providing a view below of what the trend looks like if you extract my estimate for DISH’s Sling subscribers, which are not classic pay TV subs but are included in its pay TV subscriber reporting:


On that basis, the trend is that much worse – hitting around 1.5 million lost subscribers year on year in Q3 2016.

It’s also worth noting that once again these trends differ greatly by type and size of player. The chart below shows net adds by player type:net-adds-by-player-type

The trend here has been apparent for some time – telco subs have taken a complete nosedive since Verizon ceased expanding Fios meaningfully and since AT&T shifted all its focus to DirecTV following the announcement of the merger. Indeed, that shift in focus is extremely transparent when you look at U-verse and DirecTV subs separately:att-directv-subs-growth

The two combined are still negative year on year, but turned a corner three quarters ago and are steadily approaching year on year parity, though not yet growth:

att-combined-subsCable, on the other hand, has been recovering somewhat, likely benefiting from the reduced focus by Verizon and AT&T on the space with their telco offerings. The cable operators I track collectively lost only 81k subscribers year on year, compared with well over a million subscribers annually throughout 2013 and 2014. Once again, that cable line masks differences between the larger and smaller operators, which saw distinct trends:


The larger cable operators have been faring better, with positive net adds collectively for the last two quarters, while smaller cable operators like Cable ONE, Mediacom, Suddenlink, and WideOpenWest collectively saw declines, which have been fairly consistent for some time now.

The improvement in the satellite line, meanwhile, is entirely due to the much healthier net adds at DirecTV, offset somewhat by DISH’s accelerating declines. Those declines would, of course, be significantly worse if we again stripped out Sling subscriber growth, which is likely at at around 600-700k annually, compared with a loss of a little over 400k subs reported by DISH in total.

A quick word on Nielsen and ESPN

Before I close, just a quick word on the Nielsen-ESPN situation that’s emerged in the last few weeks. Nielsen reported an unusually dramatic drop in subscribers for ESPN in the month of October, ESPN pushed back, Nielsen temporarily pulled the numbers while it completed a double check of the figures, and then announced it was standing by them. The total subscriber loss at ESPN was 621,000, and although this was the one that got all the attention, other major networks like CNN and Fox News lost almost as many.

In the context of the analysis above, 500-600k subs gone in a single month seems vastly disproportionate to the overall trend, which is at around 1-1.5 million per year depending on how you break down the numbers. Additionally, Q4 is traditionally one of the stronger quarters – the players I track combined actually had positive net adds in the last three fourth quarters, and I suspect for every fourth quarter before that too. That’s what makes this loss so unexpected, and why the various networks have pushed back.

However, cord cutting isn’t the only driver of subscriber losses – cord shaving is the other major driver, and that makes for a more feasible explanation here. Several major TV providers now have skinny bundles or basic packages which exclude one or more of the major networks that saw big losses. So some of the losses could have come from subscribers moving to these bundles, or switching from a big traditional package at one operator to a skinnier one elsewhere.

And of course the third possible explanation is a shift from traditional pay TV to one of the new online providers like Sling TV or Sony Vue. Nielsen’s numbers don’t capture these subscribers, and so a bigger than usual shift in that direction would cause a loss in subs for those networks even if they were part of the new packages the subscribers moved to on the digital side. The reality, of course, is that many of these digital packages are also considerably skinnier than those offered by the old school pay TV providers – DirecTV Now, which is due to launch shortly, has 100 channels, compared with 145+ on DirecTV’s base satellite package, for example.

This is the new reality for TV networks – a combination of cord cutting at 1.5 million subscribers per year combined with cord shaving that will eliminate some of their networks from some subscribers’ packages are going to lead to a massive decline in subscribership over the coming years. Significant and accelerating declines in subscribers are also in store for the pay TV providers, unless they participate in the digital alternatives as both DISH and AT&T/DirecTV are already.

Q1 2016 Cord Cutting Update

I gather data on a quarterly basis on the major cable, satellite, and telecoms companies in the US and their reported numbers for pay TV subscribers (as well as broadband and voice subscribers). I package this up into a slide deck for subscribers to the Jackdaw Research Quarterly Decks Service, but it’s also available as a one-off standalone purchase. This post analyzes the data on pay TV subscriptions for Q1 2016.

Cord cutting continues to accelerate

The headline here is that cord cutting continues to accelerate, a trend we’ve seen now for several quarters. As a reminder, in order to really gauge this trend, you can’t look at quarterly adds, because those are highly cyclical, and you have to look at the full set of players in the market, and not just largest, and certainly not just one type of player, such as cable or satellite companies. I’ll provide some more insight into this later in the post. On that basis, then, the chart below shows the year on year growth numbers for the industry, based on all the major public companies in the US and estimates for Cox and Bright House, two of the larger private companies. Pay TV yearly adds incl Cox and Bright House Q1 2016As you can see, the year on year declines that began a year ago in the first quarter of 2015 have grown every quarter since, and are now at over 800k. There’s no doubt at all based on these numbers that cord cutting is happening, and that it’s accelerating. More people are canceling pay TV service from these players than are signing up for service, and the gap between those two numbers is growing every quarter. The rest of this piece talks through additional detail around this trend, in several areas:

  • The additional impact on cable networks of the rise of skinny bundles and over-the-top services
  • The resurgence of cable and the decline in telco TV
  • The huge difference between trends facing larger and smaller pay TV providers.

Skinny bundles and OTT

Of course, cord cutting isn’t the only behavior that’s affecting how many customers subscribe to these services. Two particularly additional trends are the move to “skinny bundles” and the rise of over-the-top alternatives to traditional pay TV. Skinny bundles are a trimmed-down version of pay TV services from traditional providers. Verizon has Custom TV, which is one of the more extreme forms of this trend, while many other pay TV companies have also been providing similar packages with fewer channels. On its quarterly earnings call, Verizon reported that 38% of its new FiOS TV customers in the first quarter signed up for Custom TV packages, which it characterized as lower-revenue but higher margin than its traditional offerings. On the OTT side, perhaps the biggest player is Sling, from DISH. The issue from a reporting perspective is that DISH reports Sling subscribers along with its traditional satellite TV subscribers in its overall totals, without breaking them out. As such, the numbers in the chart above include several hundred thousand Sling subscribers that are generating far less revenue monthly and taking far fewer channels than the traditional pay TV subscriber. If you strip those out of the reporting (as shown by the red bars), the numbers start to look even worse:Cord cutting Q1 2016 with SlingAs you can see, you’re now talking about an annual decline that’s about twice as big, at over 1.6 million rather than 800 thousand. Why is this important? Well, if you’re a cable network, you could be affected just as much by skinny bundles and these smaller OTT bundles as you are by outright cord cutting. This is evident in the numbers reported at least annually by the major cable networks, almost all of which have declined by 2-3 million subscribers year on year in recent quarters. The only exceptions have tended to be newer networks that are still growing from smaller bases, and some of the premium networks like HBO and to a lesser extent Starz.

A cable resurgence

Another important trend we’ve seen over the last year or so is a dramatic change in the trajectories of two major groups of companies within the overall base of pay TV providers in the US. The cable companies have had a resurgence of sorts, while the telcos have faded dramatically in their ability to grow TV subscribers. The chart below compares year on year growth in subs for just these two groups:Cord cutting by cable vs telecomsAs you can see, the telcos regularly added over a million subs a year in 2012 and 2013, but since 2014 things have been heading rapidly downhill and have been increasingly negative for the last two quarters, while the cable companies have been returning closer to flat growth. Hence all those stories you’ve been seeing around earnings time for the last few quarters about the cable companies doing so well in TV sub growth, despite the overall cord cutting trend.

It’s really about large cable companies

In fact, it’s not even just about the cable companies versus the telcos, but about a division even among the cable companies. If you split cable company results by large and small companies, you see quite a disparity again:Cord cutting big vs small cable Q1 2016Here, you can see that the gains have been made almost entirely by the large cable companies, and that the small cable companies (which are even collectively much smaller) have been seeing worsening trends if anything. So it’s really that the large cable companies are making gains, while smaller cable companies and telcos are losing subscribers. The satellite providers are the last group here, and they’ve been seeing a more mixed bag of trends, with AT&T driving a resurgence at DirecTV thanks to bundling and heavy promotional activity, while DISH’s performance has been more mixed, especially if you strip out the Sling results.

Cord-cutting Update Q3 2015

I wrote a post last quarter about cord-cutting and the numbers I collect on pay TV subscribers in the US, and with all the major pay TV providers now having reported their results, I thought I’d do a quick update, especially since I’m seeing some misguided and misleading stuff out there based on others’ estimates. To be clear: cord-cutting is now a very real phenomenon, and it appears to be accelerating. A focus on single quarter results, especially on a sequential rather than year-on-year basis, can easily muddy the waters. But looking at the long-term trends makes the underlying pattern very clear.

Note: the charts and analysis here are based on the data I gather for my clients at Jackdaw Research, and a deck with lots more charts based on this data is part of the Jackdaw Research Quarterly Decks Service. You can learn more about that service and sign up here. The Q3 deck is available now to subscribers and can also be purchased on a one-off basis for $10 by clicking here. The deck from a year ago, which is similar in content, is available on Slideshare.

The three mistakes observers make

There are three fundamental mistakes people trying to measure cord-cutting frequently make:

  • They focus solely on quarterly trends, in what’s an extremely cyclical industry. Comparing this quarter’s net adds to last quarter’s tells you nothing about the underlying trends, because every calendar quarter has its own regular pattern. Ignore those patterns, or look at quarter-on-quarter trends rather than year-on-year trends, and you’ll get things totally wrong.
  • They focus only on some categories of players, such as the cable companies alone, or just the cable and satellite companies. There are three major sets of players in the US pay TV industry: cable operators, satellite operators, and telecoms operators. Ignore any one of these, or focus just on one – however large – and you’ll again come away with the wrong picture. For the last few quarters in particular, telecoms TV net adds have fallen quite a bit – leave those out of the picture, and you get a very distorted view.
  • They focus purely on the larger players. It’s very easy to focus on the largest publicly-traded pay TV providers – they’re by far the largest and  most impactful in industry terms. But even if these players serve the majority of the market, they by no means serve all of it, and in the last couple of years many of the losses have come among these smaller players. Ignoring those losses again risks distorting the picture.

A balanced view of cord-cutting

With that out of the way, I present here what’s as balanced a view as is possible to provide of what’s really going on. It’s very hard to build a truly complete picture, but if you want a representative picture, you have to include all three categories of players, and at least the largest of the smaller players too, while focusing on year on year trends. My post last quarter outlined the players I cover and the definitions I use, so I refer to you to that post if you’d like more context.

First, here’s the view of year on year video net adds for all the publicly-traded players whose reported results I track:Year on year video net adds all public playersAs you can see, the trend is consistent over the last five quarters – from almost 400k net adds in Q2 2014, the number has fallen each quarter, dropping into negative territory in Q2 2015 for the first time, and almost doubling in Q3, with almost 500k net losses among this group of pay TV providers.

The two bigger players we’re missing here are Cox and Bright House, neither of which is publicly-traded. Based on past reporting and estimates, I’ve estimated their results for Q3 2015, and adding them into the mix makes the picture look even worse:Year on year video net adds including Cox and Bright HouseLosses are now just above 500k for the quarter, and the first negative quarter (though it’s invisible in the chart) was actually Q1, when these providers lost 2k subs, according to my estimates. However, again, it was Q1 2014 that was the high point.

The dynamics between player groups are changing

Of course, underlying these dynamics is a set of different trends affecting different players. One of the reasons why some of the early commentary this quarter got things so wrong was an undue focus on the good results from some of the big cable companies. In fact, the cable companies have done better this quarter, but only because two of the big telcos – Verizon and AT&T – have dialed back their efforts in selling their TV offerings. The chart below shows year on year video net adds for these different groups of players (with cable excluding Cox and Bright House):Year on year video net adds by groupAs you can see, the cable recovery which began in late 2013 has coincided pretty much exactly with the telco slump that began around the same time. Telco adds year on year have dropped from around 1.5 million to just a couple of hundred thousand. This quarter, AT&T de-emphasized selling U-verse and actually lost subscribers for the second quarter in a row. Verizon is still gaining subscribers, but so slowly that it’s penetration rate in its addressable markets has actually begun to shrink. The satellite providers largely cancel each other out most quarters, such that their performance impacts overall market performance fairly little, but those slowing adds at the telcos are more than offsetting the slightly smaller losses at the cable companies.

A trend likely to accelerate

Hidden within these results is the fact that DISH now has its own over-the-top streaming video service, which is a potential substitute for some of these pay TV services. Sling TV subscribers are reported within DISH’s total base of subs, such that we can’t see the dynamics between the two, but others have estimated that without Sling DISH would have seen a significant drop in subscribers over the last couple of quarters. And of course Sling isn’t the only company providing these services – whether it’s indirect substitutes like Netflix and Hulu or direct substitutes like Sling, Sony’s Vue, and whatever Apple might eventually announce, a big part of the reason for the cord-cutting that’s now very evident in the market is the availability of substitutes. To date, DISH is the only one of these companies that has a competing product within its own walls, and that may turn out to be a smart strategy. But whether these companies eat their own lunch or lose share to others, it’s increasingly clear that cord-cutting is real, and accelerating.

DISH T-Mobile makes sense except for broadband

The rumors of a DISH-T-Mobile combination make a lot of sense. This is the comment I sent to several reporters last night:

This deal makes perfect sense. Given the increasing consolidation in the market, T-Mobile and DISH were in danger of becoming the lone single-service providers left in the market, with everyone else combining TV, broadband, and wireless. T-Mobile has a growing subscriber base and network but not enough spectrum, while DISH has lots of spectrum and no network, so their assets are very complementary. This merger would also go some way to overcoming some of T-Mobile’s lack of scale compared to its larger competitors, AT&T and Verizon.

Ina Fried had a more colorful formulation of the same basic idea in her piece over at Recode:

A deal between Dish and T-Mobile is akin to two people who hook up because they are the last ones left in the bar at closing time.

I think there’s a lot of logic to the deal, and it also fits with something John Legere said on T-Mobile’s Q1 earnings call about the synergies between wireless and pay TV:

I have always said on consolidation, it’s not a matter of if it’s when and how and now I’m going to add and who, because I think as we think ahead you need to think I still reiterate that in five years we will think it comical that we thought about the industry structure as the four major wireless carriers and as I said before and as Mike says many times as content and entertainment and social are moving to the internet and the internet is moving mobile, these industries, the adjacent industries are in the same game that we’re in. So whether it’s what you see Google doing. What you see the social media companies is doing or as you start to see cable players trying to move content Wi-Fi integration with mobile network et cetera, these are individual customers that are looking at both offer sets. So I think you need to think about the cable industry and players like us as not competitors but potential partners and alternatives for each other in the future.

So I think once you broaden the definition of things and I think in my mind the fixed wire and home broadband industry is the one that was of a concern there, but when you start to broaden the definition as I said of content and entertainment and video going to customers on fixed and mobile devices together and you start thinking of that industry is a far more broad set of potential partnerships integrations and mergers that the United States could be looking at and in that case I think you will see consolidation of a much broader set.

I’ve been somewhat skeptical of T-Mobile’s Un-Carrier moves, as I’ve written about quite a bit here in the past, but there’s no denying it’s disrupted the industry and created some useful innovation for consumers. Now imagine that same attitude applied to the pay TV market, and things could get really interesting.

Broadband is the elephant in the room

However, I think the elephant in the room here is broadband. Yes, T-Mobile’s LTE network is growing all the time, but wireless networks simply aren’t an efficient way to deliver broadband to the home, especially if users are expecting to be able to stream video services at increasingly high quality. Even with the combined spectrum of the two companies, there’s no way they can provide the 100-200GB of monthly bandwidth many consumers are going to be consuming. So, T-Mobile and DISH together can provide a useful bundle of mobile voice and broadband together with pay TV, but if consumers want to use Sling TV or any other over-the-top video services, that combination isn’t going to cut it, and neither mobile nor satellite broadband technology is going to solve that problem any time soon. So that’s my biggest question about the merger. I’m curious to see how the companies plan to address this if they end up announcing something.

Importantly, AT&T-DirecTV faces to some extent the same problem, but AT&T does have broadband in a significant part of the US, so this is a regional, rather than national problem. So it’s not quite the same.

Analysis of Q1 2014 cable, satellite and telco numbers

I’ve been gathering data on the major US cable, satellite and telecoms providers for the last few weeks, as they’ve been reporting earnings. This post compares their consumer financials – revenues, profits, ARPU, as well as their subscriber growth (shrinkage), and draws conclusions about the state of the market and prospects of individual players. It also provides some analysis of the likely impact of the announced merger between Comcast and Time Warner Cable and the rumored merger between AT&T and DirecTV.

A full set of diagrams and charts in addition to analysis is available in this slide deck on SlideShare (which is also embedded below).

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