The U.S. Pay TV distribution footprint is forecast to shrink by a record 2.5 million subscribers in Q2 2020.
- This follows a previous record drop of 2 million subscribers in Q1 2020.
- In the past 12 months, 6.5+ million customers have cut the cord.
- The forecast loss for Full Year 2020 is 8-9 million subscribers.
Key Factors:
- The appeal to consumers of the ‘all you can eat’ subscription services like Netflix.
- Their compelling price/value proposition versus Pay TV subscriptions.
- The rise of free AVOD — advertiser-supported — online services like Hulu.
- And all this in the context of Great Depression-level unemployment and cutbacks in consumer spending.
P&L Impact
Networks are experiencing reductions across multiple rev streams alongside COVID-related pressures on costs.
- The channels’ affiliate revenue is falling:
- Losses for most networks from cord-cutting are greater than any increases in contracted per-subscriber rates.
- (Here is a post that captures the estimated losses for 22 channels in 2018.)
- TV advertising spend is far below pre-COVID forecasts.
- Meanwhile content creation will be more costly under pandemic guidelines.
- And the networks’ programming offer is likely to be less compelling in the ‘content desert’ that will follow cancellation or ‘pause’ in productions that were scheduled for delivery in 2020-21.
Tech Platforms Dominate Legacy Media
- COVID has boosted the valuations of the tech giants Apple, Amazon, Google and Facebook.
- ‘Legacy’ platforms including Disney, Viacom/CBS, Discovery and even Netflix are overshadowed by Big Tech, as captured in this chart by LightShed Partners:
Source: Lightshed Partners
More to come…
- Big Tech has the access to capital to inflict further deep damage to the channels.
- For example, there is speculation that Apple TV+, which has made little impact since its launch in November 2019, is considering making a post-COVID bid for the Sports rights that are anchors of the entire Broadcast and PayTV eco-systems.
Discovery
It still a surprise to see Discovery — so recently a content giant — register as a mere blimp on this chart of the market cap of its new competitive universe.
- Discovery hasn’t found a buyer.
- Its Direct-to-Consumer strategy is in disarray, marked by the sudden departure last week of global strategist, Peter Faricy.
- I expect further deep headcount and programming cuts at Discovery.
- Though Discovery’s bouquet of U.S. and international channels will remain among the major global buyers of documentary and factual programs for the foreseeable future.
A Big Win for Rosary-TV?
- The Religious channel category earned a big bounce in viewing.
- That’s a highlight from Dr John Morse‘s presentation on key trends in the ‘Twilight Zone‘, his phrase for media consumption in the COVID era.
- Follow the Powerpoint and listen to John’s compelling analysis in last week’s podcast.
