26 APR 2021

COULD CORD-CUTTING GET ANY WORSE DURING 2021 AND 2022?

S&P Global research stated that MVPDs--cable, satellite, and telco--will lose 8.2% of their subscribers in 2020 after losing 7.9% in 2019.

Imagen El primer trimestre marcó un record de cord-cutters en Estados Unidos

Share

Cord-cutting is expected to get worse in 2021 and 2022, offset somewhat by the growth of virtual multichannel video programming distributors, according to a new report from S&P Global. The company stated that legacy MVPDs--cable, satellite, and telco--will lose 8.2% of their subscribers in 2020 after losing 7.9% in 2019. In 2022, another 10.3% of subscribers are expected to cut the cord.

The pay-TV losses are offset somewhat by growth among streaming distributors such as Hulu Live and YouTube TV. S&P estimates those vMVPDs will grow by 15.7% in 2021 and 12.3% in 2022. That will leave the overall pay-TV universe down 4.5% for 2020 and 6% for 2021. S&P’s report said the cable subscriber losses come primarily from the larger cable operators. “This increased pace should continue for the cable industry because the sector is increasingly indifferent as to whether unprofitable customers get their video service from cable companies or a third-party service,” the report said. 

The cable sector is projected to see a loss rate of 6.6% of its subscriptions in 2021, which is up from 4.6% in 2020. Larger cable operators are seeing a two-point increase from 3.8% to 5.8% year-over-year. Midsize (9% to 10%) and small operators (actually seeing a marginally smaller rate of loss, from 10.8% to 10.5%) will not move the needle as much. All of those numbers are expected to remain steady into 2022. Satellite’s rate of losses is expected to decrease, according to S&P, having been at 11.2% in 2020 and a projection of 10.1% in 2021 and 10% in 2022. It credits Dish’s focus on key rural subscribers, but S&P questions the long-term sustainability of this trend. Things like rate increases and churn could impact it as life normalizes. DirecTV, meanwhile, which plays in more urban and suburban markets, has not leveled off as S&P had originally thought it might, maintaining its 15% pace of subscriber loss.

S&P notes that Charter Communication bucked the trend by increasing subscribers in 2020, but will lose about 4% of its TV customers in 2021. “Longer term, we expect Charter to use ‘skinny bundle’ options to keep its video subscriber losses lowest in the industry,” the report said. Long-term, S&P said that the vMVPDs won’t stop the decline in pay-TV.

"While there was much fanfare when these low-priced, slimmed-down alternatives were launched, these services now resemble a traditional full-size pay-TV bundle and the rapid price escalation (eliminating much of the price difference) has quickly reduced the competitive advantage of these alternatives,” the report said. “Still, for the next few years, these services' subscriber base should grow at a double-digit percentage rate as the price delta will take time to contract,” it added. “Over several years, these services are likely to be less financially stable compared with legacy pay-TV services”. Cord-cutting isn’t good for the television business, but its impact is company-specific, S&P said. “Broadcast networks and local TV stations are core elements of any bundle (and they have over-the-air optionality),” the report notes. 

“On the other side of the spectrum, regional sports networks, which depend on broad distribution to overcome steep sports rights fees, and premium cable networks, which face cannibalization from streaming services, are most vulnerable to cord-cutting,” S&P said. “The ultimate impact to individual companies' operating and credit metrics depends on the specific media company. This assessment isn't uniform because most large media companies have diverse business operations, including growing streaming DTC services that benefit from the decline in legacy television.”