November 15, 2019
Then Again...
TDG's Weekly News Wrap & Commentary
Pay-TV in Q3: Is the Worst Behind Us?

Précis – Reports of Q3 '19 legacy pay-TV losses range from 1.7 million to 1.9 million, making the period “worse than ugly.” For virtual MVPD subscriptions, things improved a bit, with additions of nearly 600K during the quarter.

TDG – Yes, it was an ugly quarter for legacy MVPDs, but we’ll take an unusually moderate tone here. It is important to recognize that AT&T alone accounted for 75% of legacy losses during the quarter. In 2020, we expect the company's bleeding to slow, which will take some steam out of the recent surge in cord-cutting numbers—unless, of course, cable losses ramp up more quickly than they have to date. Second, though legacy losses continue to dwarf virtual pay-TV gains, the latter appears to be experiencing short-term momentum, in particular Hulu with Live TV (now above 2.5 million subs) and Dish Network (now at 2.7 million subs). 

Before we start cheerleading for vMVPDs, however, note that   Disney announced  this morning that the price of Hulu with Live TV will jump for a second time in 2019, this time up 22% to $55/month. One step forward, two steps back…
Pay-TV 3.0: The First Stage of App Bundling Begins

Précis – Disney’s bundling of Disney+, ESPN+, and Hulu for $13 (a savings of $5 from the $18 cost of buying each separately) is an early indicator of what the future of DTC may look like. Importantly, the bundle combines live sports (ESPN+) with the current TV shows (Hulu) and a rich film and TV library (Disney+) into a single offering, thus creating a content bundle that may be a sufficient replacement for pay-TV services.

TDG – While such studio-specific bundling was expected, it is but the first step to Pay-TV 3.0; the stage when “channel stores” like Prime evolve to offer an a la carte bundle where consumers can select apps from different studios in exchange for a small discount. Based on that structure, consumers could literally build their own streaming TV service, with integrated billing and unified search & recommendations. TDG will be releasing a report in late December focused on just this topic, which also includes 5-year forecasts for the sector and individual operators.
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“When one person suffers from a delusion, it is called insanity. When many people suffer from a delusion, it is called a Religion.” 

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