For the media industry, 2020 was the worst year ever for cord cutting, according to a new report from analyst Craig Moffett of MoffettNathanson.
Traditional distributors lost 6 million subscribers, a drop of 7.3%. Penetration was down to a level not seen in nearly 30 years, Moffett noted.
Streaming virtual multichannel video programming distributors “were, by and large, a disappointment,” he said, picking up only about a third of the households that dropped traditional pay TV.
Different distributors had different outcomes, with Charter trending up, while Comcast pointed down, and DirecTV slowing its losses while Dish got worse. The vMVPDs had a weaker fourth quarter compared to the third quarter, but “YouTube TV did well, Hulu Live did worse, Sling TV faded and AT&T more or less walked off the playing field,” Moffett observed.
Despite the erosion for the pay-TV ecosystem, media stock advanced.
“Because, well, because no one really cares that much anymore about the traditional bundle,” Moffett said. “It has already been written off for dead; what’s left is only a judgment as to whether each individual media company’s SVOD/AVOD strategy does or doesn’t have legs.”
Moffett estimates that there are now just under 12 million vMVPD subscribers. The vMVPDs added just 500,000 subscribers in the fourth quarter, which doesn’t look good compared to the 1.5 million added in the third quarter. Hulu lost subscribers.
Why are the vMVPDs not doing well. Moffett has some ideas.
“What has become increasingly clear is that SVOD and AVOD are simply better mousetraps for a very large number of customers, particularly those who aren’t sports fans .The problem they are trying to solve is not means of distribution – frankly who cares whether the bundle is delivered encoded in MPEG or IP? – but instead one of price,” he said.
For most customers, the answer is not to replace the existing bundle of networks at a somewhat lower price, but instead to blow up the bundle entirely and replace it with SVOD and AVOD subscriptions that are by almost any measure a better solution,” he added.
“Price increases for the vMVPDs haven’t helped,” he concluded. “Hulu Live’s price jumped to $65 per month in December, matching the price increase that YouTube TV took at the end of June. YouTube’s and Hulu’s prices are now fully 86% higher than when they launched two-and-a-half years ago. AT&T’s price increases have been even more aggressive. These pricing actions fly in the face of what consumers actually desire: fewer channels at lower prices.”
