Q2 likely to be miserable as operators brace for big customer losses; OTT anyone?

By Jim O'Neill on Jul 24 2017 at 3:00 PM

Could second quarter pay-TV subscriber losses in the United States top 1 million, the highest figure ever? In a word, yes.

The second quarter routinely is a weak one for operators and in the current environment – remember the first quarter saw more than 800,000 subscribers cut the cord, according to Kagan – reaching one million may be an easy task.

“We believe the second quarter is the first quarter in which pay-TV net losses exceeded the one million mark,” wrote Evercore Analyst Vijay Jayant. “We expect results to show continued pressure on the segment due to cord-cutting and growth in cord nevers.”

Wells Fargo analyst Marci Ryvicker paints an even bluer picture, saying she expects 1.28 million cord cutters for the quarter.

It wasn’t very long ago that cord cutting was dismissed as a product of slow economic growth, with many analysts saying concern about it was overblown.

But, no more. Over-the-top options are increasingly the first choice of viewers looking for their video entertainment fix. And it’s not just Millennials that are cutting the cord and moving to Internet delivered options.

A report earlier this month from Barclays notes that viewers over 50 are a major driver of OTT adoptions.

“The core demographic which drives a large proportion of television viewership (A50-64) is now starting to see viewership shift to OTT platforms,” Barclays noted. “New trends are starting to emerge which could result in the pace of declines in television viewership accelerating further.”

Nielsen recently reported a 45% bump in online video consumption among 50-64 year olds and said viewing by consumers 65-plus was up more than one-thind (36%).

The kicker for broadcasters and operators? Viewing of traditional TV was down among consumers 50-64 in the first quarter of this year, the first such decline ever.

You’re not really surprised, are you?

Pay TV is in retreat with operators looking hither and yon -- at mobile in particular – in an effort to stop their slide.

AT&T is pitching its own mobile pay-TV service, DirecTV Now feverishly as it attempts to carve a new niche out for itself among the burgeoning crowd of virtual MVPDs – Sling TV, Hulu Live, PlayStation Vue, Google Live et al. – and not get left behind. Comcast and Charter have been looking for new mobile deals that will leave them less tied to Verizon, which is also developing its own alternatives, moving forward.

Bottom line? If you’re an operator and you’re not looking – hard – at an OTT service, you’re missing the boat.

But, there’s still time… if you hurry, to hang onto some of your subscribers. Barely.

Stay tuned.

Jim O’Neill is Principal Analyst and Strategic Media Consultant for Ooyala. You can follow him on Twitter @JimONeillMedia and on LinkedIn

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