Subscriber losses will overshadow broadband growth as a topic of interest as pay TV companies report Q2 earnings over the next couple of weeks.
Wall Street has noticed the drop in subscribers and it is worried. For good reason. S&P Global Market Intelligence estimated Q1 subscriber losses at 802,000. These losses and worry about potential Q2 losses have made investors skittish.
Q2 Traditionally Weak
It doesn’t help that the second quarter is traditionally the weakest of the year. That’s when students and snowbirds move and drop pay TV subscriptions. That combination could weaken an already weak industry even more.
Then there’s the competition from telco and emerging players. Some experts expect Q2 pay TV subscriber drops to reach 1 million, maybe a little less. One analyst, Marci Ryvicker of Wells Fargo & Co. (NYSE:WFCC) anticipates second-quarter subscriber losses of 1.28 million.
Competition On The Rise
The afore-mentioned competition doesn’t help. New streaming bundles from Hulu and from Alphabet Inc. (NASDAQ:GOOGA) owned YouTube along with aggressive promotions by AT&T Inc. (NYSE:TC) of its DirectTV Now streaming bundle have all combined to give consumers more choices than ever.
The field of streaming pay-tv services has officially become crowded. It includes the likes of YouTube TV along with Dish Network’s Sling TV, which has emerged as a leader. There is also AT&T’s DirecTV Now and the previously mentioned new offering from Hulu.
Long range predictions do not paint a pretty picture for traditional pay-tv. Barclays analyst Kannan Venkateshwar estimated that as many as 31 million homes could cut (or shave) the cord over the next 10 years. At the same, he said, internet bundle services like Sling TV, DirecTV Now and YouTube TV could gain as many as 17 million of those former pay-tv subscribers.
All this adds up to expectations that Q2 earnings will indicate that Comcast Corp. (NASDAQ:CMCSAC) will lose 16,000 subscribers for the period, Time Warner Cable owned Charter may lose 125,000, Dish Network Corp. (NASDAQ:DISHC) 229,000 and AT&T a whopping 313,000 subscribers.
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YouTube TV As A Bellwether
It was thought that Alphabet, which reported earnings at the end of the day Monday might provide some insight regarding it’s YouTube TV online pay-tv service. Subscriber numbers were not expected and were not released.
What the company did report was this: Revenue growth was powered by YouTube ads. In June, the company said it reaches 1.5 billion monthly users of its regular service and planned to add 12 new TV shows to the 37 already on its YouTube Red service. Google CEO Sundar Pichai said YouTube was seeing “strong growth in emerging markets, with mobile users and on large screens (meaning TVs).”