With Comcast, Charter and Altice USA expected to release earnings in the next few days, analysts are bracing for what they expect to be a lengthy bout of video subscriber losses as consumers, financially constrained by the COVID-19 pandemic, look for ways to cut costs.
That will likely mean that while streaming viewership and broadband availability is on the rise, video losses, already impacted by SVOD offerings from Netflix, Hulu and Amazon Prime, will mount as the pandemic continues.
AT&T set the tone after reporting video subscriber losses of about 1.04 million in Q1 (897,000 at its DirecTV and U-Verse units and 138,000 at AT&T TV Now), with the pandemic only affecting two weeks of the quarter. While AT&T has other problems -- DirecTV has been steadily losing subscribers, it stopped adding new customers to U-Verse in April and is expected to steer video customers to its streaming offerings like HBO Max -- the losses have concerned some analysts.
“It’s going to be a very, very, bad stretch for cord cutting,” MoffettNathanson principal and senior analyst Craig Moffett said in a conference call with clients.
Sanford Bernstein media analyst Peter Supino has predicted that Q1 sub losses could be as high as 1.5 million in the cable sector. In a research report Supino estimated that Comcast, slated to report its Q1 earnings on April 30, would lose about 350,000 video customers in Q1. That’s about 30,000 more than he predicted earlier in the year. At Charter, he sees video subscriber losses at 180,000 (up from 150,000 previously), while Altice USA should lose about 50,000 video customers in the period instead of the 40,000 he earlier predicted.
Broadband growth also is expected to slow. Supino estimated Comcast would add 340,000 internet customers in Q1 instead of the 395,000 he had previously predicted. At Charter, he dropped his HSI estimate to 300,000 from 350,000 additions, while his forecast for Altice USA internet adds was unchanged at 10,000.
Evercore ISI media analyst Vijay Jayant was a little more optimistic. He expects Charter to lose 170,000 residential video customers (up from the 150,000 he earlier expected them to lose), while Altice USA should lose about 60,000 video subscribers, up from the 50,000 he previously predicted. Comcast should stay steady at 220,000 residential video customer losses, according to Jayant.
Both Supino and Jayant saw the greatest customer losses coming in Q2, the first full quarter under the pandemic. Jayant expects video customer losses at Comcast to more than double his previous estimates to 575,000 in Q2. At Charter, he expects video sub losses to double previous estimates to 379,000, while Altice USA will see a less dramatic increase, losing about 48,000 video customers compared to the 30,000 he predicted earlier.
But both analysts agree that any subscriber erosion due to coronavirus is a combination of shrinking income -- to date 26 million U.S. jobs have been lost as a result of the pandemic -- and the loss of live sports programming. Jayant noted that live news and sports are the primary drivers for pay TV subscriptions, so the loss of sports programming makes the decision to cut the cord easier.
“While news viewership has soared since the coronavirus crisis hit, live sports content has ground to a halt, removing a key reason for consumers to keep pay TV services, especially since news content is relatively readily substituted with online or streaming options,” Jayant wrote.
