“There’s definitely an opportunity for traditional pay TV providers … to increase engagement,” analyst Steve Nason says
The coronavirus pandemic, while sabotaging the U.S. economy overall, has led to a few select companies benefiting from millions of people suddenly being compelled to spend more time at home. Zoom, for instance, has seen its stock price surge 25% in the last month, as more people gravitate towards its video-conference technology for both work and staying connected to family and friends.
Will all this nesting at home boost traditional cable and satellite TV providers — who have experienced record losses in recent quarters, as cheaper over-the-top alternatives continue to lead customers to cut the cord? Or will the outbreak prove the kiss of death for companies like DirecTV and Comcast, as customers look to save money by abandoning their service? Analysts say the answer lies somewhere in the middle.
On the one hand, people simply don’t have as much to do right now. They’re cooped up in their homes, and watching TV is one of the few entertainment options available. Comcast on Monday reported its TV customers are now watching 64 hours of content each week, an increase of about 7% from the same period last year; that goes along with a 25% spike in on-demand viewing compared to last year. And a rep for AT&T, the parent company of DirecTV, said Tuesday it had a 15% increase in live TV viewing last week compared to the same time last year, as well as its own 25% increase in on-demand viewing.
These are modest improvements, but any uptick is a welcome change for an industry that has been decimated in recent years. According to research provided by Ampere Analysis, pay TV providers lost 5.7 million customers in 2019, an increase of 67% from the year prior.
“There’s definitely an opportunity for traditional pay TV providers, with the existing customers they have, to increase engagement and maybe have a better chance of retaining them, at least in the short term, because everyone is a captive audience,” Steve Nason, research director for Parks Associates, told TheWrap. “They have a better chance of retaining subscribers than they did before” the COVID-19 outbreak.
Having a captive audience could help in another way, too. Bruce Leichtman, president and principal analyst for Leichtman Research Group, said he expects there will be a momentary decline in customers ditching their TV service because less people will be moving houses. “One of the big things that causes churn is moving, and obviously moving is going to be down,” Leichtman said.
While this may help pay TV providers keep customers in the fold, Leichtman said the phenomenon cuts both ways: COVID-19 will also lead to a drop in trucks and manpower able to connect new customers. “We’re likely going to see, because of a slowdown in moving, a slowdown in disconnects, as well as a slowdown in connects,” he said.
Connections tend to be the part left out when discussing cord-cutting, Leichtman said. It’s not just about how many customers are dropping a service, but how many people are signing back up. And for pay TV providers, customers haven’t been signing up in recent years — leading to net losses quarter over quarter. A recent Leichtman survey found that 5% of all U.S. households dropped their pay TV service last year. (And while Netflix saw the same 5% churn in 2019, the streamer also added 1.1 million during the second half of the year — and another 15 million overseas subscribers.)
But this, again, may work in pay TV’s favor, at least in the short term. Toby Holleran, research director for Ampere Analysis, said customers who are still clinging to their cable or satellite service may be less inclined to drop their service because of budget concerns.
“Due to the consistent annual decline of pay TV, we expect many of the remaining consumers to be a bit less price-sensitive than the early cord-cutters,” Holleran said. “That being said, as with Comcast, we expect those who have a pay TV subscription — even if they intend to churn in the near future — to increase their usage in the short term, as TV will serve as a primary source of news and entertainment for many, particularly as many people isolate in their own homes.”
Add it all up — the need for more entertainment sources, the drop in customers moving, and remaining pay TV customers being less concerned about pricing — and COVID-19 seems to have at least slowed the rate at which customers were ditching their service.
Still, while linear TV has enjoyed marginal boosts in time spent watching content this month, streaming services are continuing to grow at a pace that would make any pay TV provider jealous. On Tuesday, Nielsen reported that 400 billion minutes of content were streamed during the first three weeks of March in the U.S., an 85% increase year over year.
Streaming services, including live TV packages from Hulu and YouTube TV, are headed in one direction, and traditional pay TV providers are headed in another. Even with the pandemic offering pay TV providers a modest increase in viewing, it’s unlikely to reverse the trend that’s already in place, the analysts agreed.
“There’s going to be a drop,” in pay-TV subscribers in the first quarter, Leichtman said. March may provide a brief respite when it comes to customers exiting, but it still only accounts for the last month of the quarter. When it comes to cord-cutting, “the momentum is already heading in that direction,” Leichtman said, and it’s not going to completely stop, even if the coronavirus has a few more people clinging to their service.