Pay TV Services Are Trading Analog Dollars for Digital Dimes

Two ifs:

  • If broadband delivered skinny over-the-top bundles causes its pay TV owner to lose as many subscribers as Dish has lost — 320,000 traditional satellite subscribers in Q3 and 949,000 over the past year, down 8.1% year over year, according to MoffetNathanson analyst Craig Moffett who estimates that Dish’s Sling TV added 204,000 subscribers in Q3 and 517,000 over the past four quarters. Dish’s net decline in Q3 was a combined loss of 116,000 traditional pay TV and Sling TV subscribers.
  • If broadband delivered skinny over-the-top TV bundles cause its pay TV owner to have margins in the 1% to 2% range as DirecTV is said to have, according to Deutsche Bank analyst Matthew Niknam. See: http://www.fiercecable.com/cable/directv-now-margins-only-1-2-but-ads-and-low-capex-will-make-it-work-deutsche-bank-says

Then what’s the future for traditional linear pay TV as we know it? Fewer high-profit pay TV subscribers in exchange for subscribers to skinny bundles with much lower margins?

Satcos Dish and DirecTV don’t have a booming broadband business that they can use to keep profits up. DirecTV owner AT&T has a broadband service but because it failed to upgrade it to modern expectations until recently and so is continuing to lose highly profitable broadband subscribers to cablecos. Still they and the cable and telco pay TV services will have to increasingly offer low cost OTT skinny bundles – bundles that will replace their lucrative traditional pay TV services.

Compare how many subscribers in the last year have cancelled their Dish subscription and how many have subscribed to Sling TV lineup. MoffetNathanson estimates that in the last year Dish lost 949,000 traditional satellite subscribers in the past year and added 517,000 Sling TV subscribers.

This all has to be considered in the light of one more startling statistic about the decline of the US pay TV industry: US pay TV services lost 430,000 subscribers in Q3, which brings the total year-to-date losses to a record 1.3 million subscribers, according to SNL Kagan.

Bring on broadband and its high margins!

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