After years of steady declines, cord-cutting by subscribers to MVPDs may finally be flattening while viewing on free streaming services is on the rise, according to a new study from Horowitz Research.

More than half (52%) of the 2,200 adults surveyed in Horowitz’s State of Media, Entertainment and Tech: Subscriptions 2023 study said they subscribe to multichannel video programming distributors (MVPDs), matching last year’s survey percentage. Further, 80% of MVPD subscribers rate their satisfaction with their pay TV provider at 80%, slightly up from last year, according to the researcher. 

Also, 32% of cord-cutters say that they might return to cable if the cost of streaming services continue to increase. Consumers report spending more than $50 per month on subscription streaming services, with only 33% of cord-cutters reporting that they were saving “a really good amount” compared to the traditional MVPD bundle. Increasingly consumers are looking for managed services to help control costs, according to Horowitz. 

“Managed services — in which subscribers can see and manage all their streaming content in one place — would be an antidote to the challenges inherent to today’s highly fragmented streaming space, and consumers seem open to consolidating their services together,” Horowitz Research chief revenue officer and insights & strategy lead Adriana Waterston said. “It’s a matter of which companies will compete to be the managed services solution from the streaming age, between traditional MVPD’s and tech companies like Amazon, Samsung, Roku and Apple.” 

Meanwhile, consumers are spending more time accessing free ad-supported streaming TV [FAST] services. Nearly 70% of viewers use free streaming services like Pluto TV, Tubi, Peacock and YouTube at least monthly, up from 42% in 2019, according to the survey. 

“The adoption of AVOD/FAST services — and the concomitant increase in streaming ad revenue we can expect to see — will help offset revenue loss on the linear side, which is critical as programming costs continue to skyrocket,” Waterston said.

The survey was conducted in January and February of 2023, Horowitz said.

Evercore ISI media analyst Vijay Jayant believes that cord-cutting, after a record 2019, could ease up in 2020 as the remaining pay TV customer base appears more enamored of live news and sports.

In a research note, Jayant acknowledged that cord-cutting reached a peak in 2019 -- 6 million pay TV customers left the fold by his estimate, up from 4 million in 2018 -- but that there are signs that 2020 could be better for traditional distributors.

Jayant added that the 2019 results were in part artificially skewed by DirecTV, which lost 1.1 million customers in Q3 after discontinuing heavy promotional pricing. He also pointed to a survey conducted by Evercore ISI (using about 600 pay TV customers) that suggested that “with payTV penetration now sitting just over ~70%, the marginal cord cutter is more likely a stickier sports / news content consumer.”

As a result, he predicts that pay TVwould lose about 4.8 million subscribers to cord-cutters in 2020.

Virtual MVPDs, after two straight years of solid growth (2.5 million additions in both 2017 and 2018), slowed down in 2019, with Jayant estimating the category added less than 1 million customers in 2019. That slowdown should continue this year, especially since Sony PlayStation Vue, which Jayant estimated once had about 700,000 customers, has said it will close its doors early this year. 

“The slowdown in MVPD subscriber growth has been driven by a combination of lower promotional discounts, higher list prices, and possibly increased password sharing,” Jayant wrote.

Growth in subscription video on demand services is expected to accelerate in 2020, as more new entrants come on the scene. The space, dominated by Netflix, Hulu and Amazon Prime Video, is getting increasingly crowded with the November launch of Disney + and the expected debuts of HBO Max (May), NBC’s Peacock (April) joining other existing services like CBS All Access and Showtime. Jayant estimated that SVOD providers would add 30 million subscribers globally in 2020.

“While these services are not true substitutes for pay-TV, incremental content made available in the direct-to-consumer arena could still weigh on multichannel subscriber trends,” Jayant wrote.

While Jayant expects video margins to continue to contract -- he estimated programming costs per subscriber for Comcast and Charter would rise in the mid-to-high single digit percentages in 2020 -- that should be offset by broadband gains. The analyst expects about 3 million net broadband subscriber gains for the year, with cable continuing to take share from DSL. Fixed wireless 5G, he added, shouldn’t have an impact in 2020.

As far as wireless, Jayant noted that the key themes should continue to be ongoing consolidation efforts and the deployment of 5G offerings.

Jayant expects the 2020 election and the summer Olympics to drive TV advertising revenue up by mid-single digit percentages, with political spending expected to be up by 60% compared to 2016 given a number of tight races, with local broadcasters, MVPDs and cable networks being the biggest beneficiaries.

Among Jayant’s top picks for the year: ViacomCBS (which he says has an underappreciated digital business); Nexstar Media Group (due to political ad seasonality and benefits from its recent Tribune Media purchase); Charter Communications (he increased his price target on the stock to $600 per share citing strong operating free cash flow growth and market share performance).

Cord-cutters over the age of 30 appear to be happy with their new TV situation and are unlikely to rejoin the pay TV fold, even as their economic situations change for the better, according to a recent focus-group study by Sanford Bernstein media analyst Todd Juenger.

Juenger, who has held theses focus group studies before on different topics before,conducted a two-day panel in Boston and New York on April 14 and April 21, asking a series of questions to a small group of “older “ (over 30 years of age) consumers who have recently severed their  pay TV relationship. Juenger was quick to acknowledge that the size of the group – about 31 men and women – was extremely small and that the research should not be used to project any qualitative findings. But it does provide insight into why some consumers do what they do.

According to the responses, the older cord-cutters were not influenced by specific offerings from OTT providers (which should be good news for traditional distributors, Juenger wrote) or by the loss of a job or other major economic event. Instead, the driving force behind the decision to cancel their pay TV subscriptions was mainly an “aha moment,” when the participants realized they could be spending the money they were shelling out for pay TV on more constructive things.

Most of the participants were still avid TV watchers – they on average confessed to watching about two to three hours of TV during weekdays and three to four hours on weekends. But instead of surfing 150 channels through a pay TV subscription, they meet those needs through over-the-air broadcasts, Netflix, Hulu and Roku subscriptions. In addition, once they change their habits, they are not likely to go back to the old linear TV model. Juenger wrote that the answer was almost unanimously "no" when asked if they would pay $5 per month to get their favorite channel back.

“The over-riding sentiment was: ‘we're good,’” Juenger wrote. “They are happy. They have discovered how easy it is to find content in other ways (including the widespread use of digital antennas). They have also discovered that they don't really miss having the TV on all the time.”

A sharp rise in cord-cutters during the second quarter helped drive pay TV customer losses to record highs in the period with the industry losing about 625,000 subscribers in the period, according to SNL Kagan.

According to Kagan, the losses were the heaviest to date, as total pay TV customers dropped to 100.4 million in the period. The losses were mainly driven by sharp declines at satellite TV and telco TV companies, who usually take up the slack for cable losses. Ironically, cable, which has been the focus of much of the cord-cutting hysteria over the past several months, had its best second quarter since 2008 according to Kagan, shedding about 350,000 basic customers. Cable operators lost about 211,000 basic customers in Q2 2008 and on average have shed 609,000 subscribers in the second quarter.

While the second quarter is a traditionally weak one as college students leave school and customers disconnect service as they move to summer residences, Kagan said the slide follows an uncharacteristically weak first quarter, when total subscribers were down by 26,000. That could point toward the possibility of a much larger decline for the full year than during 2010-2014, which was, according to Kagan, “a period of general malaise.”

Kagan’s numbers are slightly higher than previous estimates by MoffettNathanson principal and senior analyst Craig Moffett, who said declines were about 566,000 in the quarter.

Other highlights from the Kagan report include:

•  Telcos increasingly appear to be trading subscriber gains for improved financials. AT&T's U-verse has aligned its strategy with DirecTV’s focus on profitability. As a result of the belt tightening, the combined multichannel video subscribers served by FiOS and U-verse were flat at 11.7 million at the end of the second quarter, behind net adds of just 4,000. 
• The DBS segment lost an estimated 304,000 subscribers, as DirecTV and Dish Network both reported record declines. The DBS segment retreated to just under 34 million subs, according to Kagan.   

Cable stocks began the long crawl back on Friday after two straight days of heavy losses, with Viacom and other major media stocks gaining back some lost ground.

The programing sector was hit hard in the past few days, with stocks in the sector down a collective 10% between Aug. 5 and Aug. 6 as investors, skittish over over-the-top competition, declining ratings and slumping ad revenue, headed for the exits. Viacom dipped more than 14% on Aug. 6 after reporting a 9% decline in domestic ad revenue in its fiscal third quarter. Discovery dipped 12% on Aug.5 after it reported sluggish results for its U.S. networks and others like Walt Disney Co., 21st Century Fox and AMC Networks weathered similar declines.

Viacom began the long road back, rising as much as 6% during the day before closing at $45.47, up 3.1%. Other stocks were up slightly – 21st Century Fox rose 2.8%; AMC Networks rose 1.4%; Time Warner Inc. increased 1.2%; and Disney increased 0.7%. Discovery, which gained back some ground Thursday, fell 1.5% on Friday.

Distribution stocks also felt some pain early on – Comcast dipped about 5% on Aug. 5 and Charter, Time Warner Cable and Cablevision declined in the 1% to 2% range. Cablevision, which reported second quarter results on Friday, saw its stock dip as much as 4% on Aug. 7 before closing at $25.82 each, down 2.7%, despite reporting its first positive customer relationship growth (5,000 customers) in two years.

Cablevision CEO James Dolan also lashed out at Verizon Communications’ FiOS  service – the company is often singled out by analysts as having the greatest exposure to FiOS service in the cable industry – claiming that the telco has lost the competitive fight.

On a conference call with analysts, Dolan said that since Cablevision began competing with FiOS, Cablevision has taken about 2 million phone customers from the telco to become the largest telephone company in the tri-State area.

“The impact of FiOS on Cablevision has been minimal,” Dolan said, adding that the telco fiber unit is “an unprofitable business today, and I doubt that they will ever be profitable.”

Cablevision, on the other hand, has transformed its business, focusing on connectivity rather than promotions, and has led the charge for flexible packaging with its cord-cutter package (high-speed Internet and a digital antenna) and other products.

“Cablevision has changed its culture. We no longer think like a monopoly. The Verizon FiOS Effect, if there ever was one, is over,” Dolan said.

Verizon said its products would provide the best response to Dolan's claims.

“We’ll let our FiOS services speak for themselves – better Internet speeds, better connectivity, better TV quality, tops in customer service rankings, and better overall value for our customers,” Verizon spokesman John Bonomo said in a statement. “That speaks volumes.”