Growth slowed for virtual multichannel video programming distributors (MVPDs) in the third quarter of 2021, as the category added just under 1 million subscribers compared to 1.7 million new subscribers a year ago, according to a cord-cutting analysis by MoffettNathanson.
Including the modest gains for the vMVPDs, total pay TV distribution was down 5.2% in the third quarter, the biggest drop since the 5.5% decline in the second quarter of 2020.
Losses for cable operators reached 6.2% in the third quarter, the fastest decline on record. Satellite distributors lost customers at nearly twice that rate at 12%, but that was an improvement from a year ago, when subscribers declined 14%.
The vMVPDs now have about 14.2 million subscribers, MoffettNathanson estimates.
MoffettNathanson blamed the vMVPD deceleration in part on price increases.
“Six years ago, everyone burst out of the gate with eye-popping low prices,” MoffettNathanson said in a report Tuesday (January 5). “That helped them get out of the gate, but it undermined their longer-term prospects in two ways.”
The first issue was that the vMVPDs attracted price-sensitive consumers. The second issue is that the vMVPDs would have to their raise prices faster than traditional distributors as content companies increased their license fees.
DirecTV Stream has already raised the price of its Choice and Premier tiers, effective January 23. And having reached a new deal with The Walt Disney Co. at the end of the year, a price increase for YouTube TV — the biggest of the vMVPDs — is just around the corner.
YouTube TV added 225,000 subscribers in the third quarter, MoffettNathanson estimated, down from 400,000 additions a year ago. Hulu Live added about 300,000 subs in the quarter, compared to a gain of 700,000 a year ago. A big gainer in the quarter was FuboTV, which added more subscribers in the quarter than a year ago and now has a total of 945,000 customers.
For media companies, growth of affiliate fees slowed to 3% in the third quarter. Retransmission fee growth dropped to 11% in the third quarter from 15% in the second quarter. Cable-network fees rose 2%, down from 3% in the second quarter.
Retrans fees rose more than 14% for Disney, NBCUniversal and Fox, but less than 4% for ViacomCBS. NBCU also rang up the biggest cable affiliates fee growth at 7.5%. AMC and Turner’s fee revenue dropped compared to a year ago.
“There was a time when cord-cutting statistics were avidly watched,” MoffettNathanson concluded. “Not anymore.”
“The market seems resigned to a steady deterioration. Yes, the rate of decline (when one includes vMVPDs) at 5.2% is among the worst on record, and is undoubtedly worse than we and others had once over-optimistically projected. But it is still orderly, and as long as the decline is orderly, media investors have leave to focus on the upside promise of DTC platforms rather than the downside certainty of linear,” the report said.
“But there is clearly a risk that the declines become disorderly. All it would take is one major player — ESPN is the obvious candidate — to decide that the future demands a bolder shift in their best programming to DTC, or, alternatively, that their entire suite of programming should be simultaneously available DTC … and the Jenga tower would collapse,” they said. ■
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