Pay-TV Troubles on Full View in Poor Start to 2020
Cord cutting is still an issue, but a subscriber death spiral remains unlikely.
The onset of lockdowns in March fueled demand for at-home entertainment, but not necessarily the kind that the U.S. pay-television industry delivers. Television customer losses were ugly in the first quarter. We don’t believe media investors should panic, though, as several factors have simultaneously conspired against traditional TV, in our view: the loss of live sports, the relative ease of switching off Internet-delivered services like YouTube TV, poorly timed pricing changes (especially at AT&T), and economic hardship resulting from the pandemic. We expect that the return of sports, in particular, and any improvement in the economic situation will help the industry.
Still, the recent resurgence in price increases--only partially reflecting steadily rising content costs--has given us pause. Our thesis that the industry would find creative ways to improve the price/value equation for consumers hasn’t materialized, and prospects have dimmed. We no longer believe the media industry has the wherewithal to fix its TV problems, as companies appear content to milk the business for cash while investing in their new streaming offerings.