70% of TV Channels Lost Share in 2016

Cord cutting and cord avoidance are part of the reason most TV channels now see audience losses. What else would you expect in a market where choices keep growing, but discretionary time does not? The point is, even if one "solves" the problem of fewer people subscribing to video services, that does not mean the "market share" problem (smaller audiences) gets solved.

Most economic or industrial “problems” are difficult to solve. There typically are opposed stakeholders, often multiple drivers of industry dynamics and underlying performance trend.

The problem of “jobs moving from high-wage to low-wage areas;” coal industry dynamics or viewership of linear TV channels provide examples. One can try and stop the movement of jobs, but then it becomes logical to eliminate the jobs altogether, by automating or changing business practices.

One might blame coal industry declines on government policy (true enough, in many cases), but also note that the better economics of natural gas (it is cheaper than coal for electrical generation) would cause distress in the coal industry in any case.

So too in the television network area, one might argue that changing consumer demand (cord cutting) is leading to less viewership of ESPN and other channels. But it also is true that in a market with vastly more choices, and a fixed number of buyers and discretionary time, that viewing time on any legacy channel likely has to fall.

In other words, people have a relatively-fixed amount of time for leisure, and less time than that for watching TV. If choices grow from dozens to hundreds, it stands to reason that some time has to shift from the dozens of legacy channels to the new channels. Such audience fragmentation has been going on since cable TV channels first appeared, taking audience share from the “big three” broadcast TV networks.

When there are hundreds of channels, plus new services (Netflix, Amazon Prime, DirecTV Now, Sling) that shift additional video viewing time away from “channels,” audience fragmentation seems an inevitable consequence. Dividing market share in any market is different when there are just three providers, dozens of providers, hundreds of providers or virtually thousands of choices (each on-demand title represents a chance to “spend time” that competes with watching a TV channel for the equivalent amount of time).

That is why most--if not all--legacy channels will continue to be under pressure. It is not just a “sports” or “ESPN” problem.

source: CNBC

AT&T Announces Pricing for New Streaming Services

In addition to DirecTV Now, AT&T’s new streaming video service, AT&T also has announced price points for two other services, FreeVIEW and Fullscreen, both of which can be used with no data plan usage for AT&T mobile service customers.

Fullscreen offers more than 1,500 hours of ad-free premium scripted and unscripted original series, TV shows and films licensed from studio partners.

Fullscreen can be used at no charge for one year, for all AT&T mobile plans including a messaging service, and without incurring data usage charges. Regular pricing after the introductory year is $5.99 a month.

Fullscreen can be used anytime, anywhere in the United States, at www.fullscreen.com, on iPhone, iPad, select Android Phones, Chromecast and Apple TV devices.

FreeVIEW also provides unique and exclusive content free of charge, including a sampling of on-demand content from AUDIENCE Network, Otter Media properties and other channels on DirecTV Now, using either the DirecTV Now app or at the web site, www.directvnow.com. Streaming of FreeVIEW does not incur data charges.

AT&T also announced pricing for DirecTV Now, including

• Live a Little – $35 / month (60+ channels)
• Just Right – $50 / month (80+ channels)
• Go Big – $60 / month (100+ channels)
• Gotta Have it – $70 / month (120+ channels)

Fans of HBO and Cinemax can add these channels for just $5 each per month in addition to your base programming package.

DirecTV Now will be available at launch through the following:

• Amazon Fire TV and Fire TV Stick
• Android mobile devices and tablets
• iPhone, iPad and Apple TV
• Chromecast (Android at launch; iOS in 2017)
• Google Cast-enabled LeEco ecotvs and VIZIO SmartCast Displays
• Internet Explorer, Chrome and Safari web browsers.

Support for Roku streaming players and Roku TV models, Amazon Fire tablets, and Smart TVs from Samsung and other leading brands will be added in 2017.

AT&T continues to argue that the primary audience for these services are about 20 million households that use the internet but do not buy linear TV services. That includes people who used to subscribe as well as those who never have subscribed to a linear TV service.

But that also means AT&T now competes with other services such as Sling and PlayStation Vue, for example. Some might argue the new services also will compete with Netflix, Amazon Prime and Hulu, to some extent.

The other issue is how much impact, if any, might eventually be felt by the linear video business, affecting both AT&T’s own DirecTV service and those offered by others such as Comcast and Charter Communications, even if the immediate expected customer base is “non-buyers of linear video service.”

To What Extent Does Consumer Video Drive Strategy at AT&T?

Randall Stephenson, AT&T chairman and CEO recently has said  “the consumer is about one thing, it's about video.” Coming from a firm such as AT&T, the comment shows--in large part--what is driving telco consumer services strategy.

Though many questioned AT&T’s acquisition of DirecTV, AT&T argued it had a plan both for wringing immediate and long-term value from the deal. So far, AT&T arguably is showing it is right.

Seen both as a way of creating a nationwide video footprint to match its mobile footprint and a way to create more value from bundling, the deal also was touted as boosting free cash flow needed to support AT&T’s hefty dividend payouts.

Less clear at the time was the way DirecTV would be leveraged to support the next generation of streaming services. AT&T might now be showing it has a plan for transition at scale.

AT&T’s new online streaming video service, DirecTV Now, will become the company’s primary video platform in three to five years, some inside AT&T apparently now predict. The speed of that change--and its implications--show just how much change might be expected in the entertainment video business and the service provider business model.

By switching to over-the-top delivery, AT&T in principle could avoid truck rolls, marketing, in-home capital and other fulfillment cost. DirecTV Now, though primarily aimed mostly at attracting new subscribers among the ranks of consumers disenchanted with linear services, might also eventually appeal even to consumers of facilities-based services that require a physical connection (satellite dish installation or installation of cables and set-tops.

Eliminating a truck roll and customer premises equipment could eliminate several hundreds of dollars of cost whenever a new customer is signed up and activated.

DirecTV Now, set to be introduced by the end of 2016, appears aimed at about 20 million households that have no cable or satellite service, competing with services such as Sling by Dish.

One might argue that DirecTV Now is worth doing if the “unconnected” were the only target. But the benefits might also extend to other consumers who already buy either a fixed network or satellite-delivered linear service.

For AT&T there are trade-offs in other areas, particularly the need to ensure that its access bandwidth assets are plentiful enough to support the big upsurge in bandwidth consumption on mobile and fixed networks.

Nobody knows precisely when the slow decline of the linear video business might become non-linear and rapidly decelerate. AT&T now is acting as though it wants to move faster, even if some might argue linear TV providers can rely on  a relatively long transition period.

Dish Network 2Q: Revenue and Subscriber Losses

Dish Network reported second-quarter 2016 earnings that topped expectations, but Dish Network also had a net loss of 281,000 pay-TV subscribers, including satellite and the Sling web TV service, said to be the biggest quarterly subscriber loss ever, for Dish.

DirecTV, owned by AT&T, seems to have added customer accounts in the second quarter.

Here’s the importance: every legacy service provider is in a race to create new revenue streams at least as fast as each service provider loses legacy accounts. Pressure on top-line revenue and customer account attrition might mean Dish Network is losing that battle, despite the launch of Sling TV streaming services.

That leaves speculation about Dish Network entering the mobile business.

Opinions about what Dish Network might be able to do with its amassed mobile spectrum have varied. Some seem never to have believed Dish Network really would become a mobile service provider, and eventually would simply sell its spectrum.

Others believed Dish Network might well try and enter the mobile business.

The “problem” for observers is that much hinges on whether Dish Network concludes it is time to sell, time to build to create value before selling, or time to transition to a new business model and grow over the long term.

It is not clear anybody outside Dish Network, and aside from Charlie Ergen, Dish CEO, have any idea what the company will do.

U.S. Linear Video Subscriptions Drop, Revenue Grows

Despite its mature status, linear video subscription revenue grew three percent to $105 billion in 2015 and will reach $107 billion for 2016, according to Convergence Consulting. But linear video subscribers continue to dwindle.

OTT video service revenue (from CBS, HBO, Hulu, Lifetime, Netflix, Noggin, PlayStation, Seeso, Showtime, Sling, Starz, Tribeca) grew 29 percent to $5.1 billion in 2015 and will hit  $6.7 billion for 2016.

If correct, OTT video now represents about five percent of network-delivered video entertainment revenue.

Linear video subscribers declined by 1.131 million, following a  2014 decline of 283,000.

In 2016, subscribers will decline by 1.112 million, Convergence Consulting predicts.

At the end of 2015 the firm estimated 24.6 million U.S. households (20.4 percent) did not have a traditional linear TV subscription, up from 22.5 million (18.8 percent of households) at the end of 2014.

Convergence Consulting estimates 26.7 million (21.9 percent of households) will have no such subscription by the end of 2016.

In 2014, 1.27 million more households abandoned linear TV (including both abandonment and new household formation without buying linear TV . In, 2015 2.1 million homes did so, while 2.08 million will do so in 2016.

source: Convergence Consulting

Video Business Change: Watch for Qualitative Changes

The U.S. linear subscription video business lost more than one million video customers

in 2015, about four times the level of 2014 losses, and the third year in a row that linear subscription TV losses have occurred, according to SNL Kagan.

The fourth quarter improved, with losses no worse than the fourth quarter of 2014. The industry dipped by 15,000 total customers in the fourth quarter.

Mostly, that is noise.

Some observers will suggest that performance reflects a high level of promotional activity on the part of suppliers. Others will conclude that the cord cutting trend has abated.

Not so. The big changes now are going to be qualitative, not quantitative, in the sense of subscriber counts. In other words, OTT suppliers will begin a long march to replicating most of the content richness linear services provide.

So the key changes will not so much be about subscriber gains or losses, but the change in the nature of the relative products. OTT will gain richness, while linear services will offer more-affordable packages with less content diversity.

Cable TV operators lost 599,000 net accounts in 2015, the first time in seven years that the cable TV industry lost fewer than one million accounts. Some will point to telco account losses as a large part of the reason for the limited cable TV losses.

The satellite providers lost 478,000 subscribers during the year, compared to a loss of 39,000 in 2014.

The telco segment ended 2015 essentially flat.

According to Leichtman Research, the big net change in 2015 was that cable TV providers did much better, telcos did much worse.

The top nine cable companies lost about 345,000 video subscribers in 2015, compared to a loss of about 1,215,000 subscribers in 2014.

Satellite TV providers added 86,000 subscribers in 2015 (including Dish Network OTT subscriptions). In 2014 the satellite providers gained 20,000 subscribers.

Excluding the Sling TV gains, DBS providers lost about 450,000 linear subscribers in 2015.

The top telephone providers lost 125,000 video subscribers in 2015, compared to a gain of about 1,050,000 net additions in 2014.

In the fourth quarter of  2015, the top linear TV providers added about 110,000 subscribers, more than the 90,000 added in the in fourth quarter of 2014.

The largest cable companies added about 125,000 subscribers in the quarter, the first quarter for net additions since the first quarter of 2008.

DirecTV net adds of 214,000 subscribers in the quarter were higher than in any quarter since the fourth quarter of 2010.

AT&T U-verse lost 240,000 subscribers in the quarter, compared to a gain of 73,000 subscribers in the same quarter of 2014.

It likely is unwise to assume that the shift to OTT entertainment video has slowed, even if Netflix and others have begun to reach saturation levels. But the bigger changes might come in the form of packaging and pricing, not subscription levels as such.

Look for OTT offers to proliferate, and gradually start to replicate more of the program diversity linear services represent. That is the growth pattern we have seen recently for any number of competitive services.

They start out on the low end of the value continuum, but are available at vastly-lower cost. Over time, value increases. That is going to be the pattern for OTT video as well.

Big 2015 Change in U.S. Linear Video Market: Cable Gains, Telcos Lose

The 13 largest linear video providers, representing about 95 percent of the market lost a net 385,000 accounts in 2015, marginally worse than the net loss of about 150,000 subscribers in 2014 and a net loss of about 100,000 subscribers in 2013, Leichtman Research says.

Keep in mind that those 13 suppliers have a collective 94.2 million subscribers, so even a loss of 385,000 net accounts represents just four-tenths of one percent of the base of customers.   

The big net change: cable TV providers did much better, telcos did much worse.

The top nine cable companies lost about 345,000 video subscribers in 2015, compared to a loss of about 1,215,000 subscribers in 2014.

Satellite TV providers added 86,000 subscribers in 2015 (including Dish Network OTT subscriptions). In 2014 the satellite providers gained 20,000 subscribers.

Excluding the Sling TV gains, DBS providers lost about 450,000 linear subscribers in 2015.

The top telephone providers lost 125,000 video subscribers in 2015, compared to a gain of about 1,050,000 net additions in 2014.

In the fourth quarter of  2015, the top linear TV providers added about 110,000 subscribers, more than the 90,000 added in the in fourth quarter of 2014.

The largest cable companies added about 125,000 subscribers in the quarter, the first quarter for net additions since the first quarter of 2008.

DirecTV net adds of 214,000 subscribers in the quarter were higher than in any quarter since the fourth quarter of 2010.

AT&T U-verse lost 240,000 subscribers in the quarter, compared to a gain of 73,000 subscribers in the same quarter of 2014.

Providers	Subscribers at End of 2015	Net Adds in 2015
Cable Companies
Comcast	22,347,000	(36,000)
Time Warner Cable	11,035,000	43,000
Charter*	4,430,000	11,000
Cablevision	2,594,000	(87,000)
Mediacom	855,000	(35,000)
Cable ONE	364,150	(87,067)
Other major private companies**	7,435,000	(153,400)
Total Top Cable	49,060,150	(344,467)
Satellite TV Companies (DBS)
DirecTV	19,784,000	167,000
DISH^	13,897,000	(81,000)
Total DBS	33,681,000	86,000
Telephone Companies
AT&T U-verse	5,640,000	(303,000)
Verizon FiOS	5,827,000	178,000
Total Top Phone	11,467,000	(125,000)
Total Top Pay-TV Providers	94,208,150	(383,467)

source: Leichtman Research

Top U.S. Linear Video Providers Lose Subs in 2015 for First Time Since 2006

For the first time since Verizon and AT&T launched their TV services in 2006, the six largest U.S. linear video subscription providers lost subscribers for a full year, despite gains in the seasonally-strong fourth quarter, says Ooyala.

There possibly should be an asterisk, however. Some of those firms now include streaming accounts in their subscriber totals. That is akin to a mobile operator including prepaid accounts as well as postpaid accounts in the subscriber totals, mixing higher revenue, higher value net adds with lower value, lower revenue gains.

In the fourth quarter of 2015, DirecTV, AT&T, Time Warner, Comcast, Dish Network and Verizon gained a net 125,000 subscribers.

DirecTV (owned by AT&T) gained 214,000 subscribers in the U.S. market, but AT&T’s  U-verse also lost 240,000 for the quarter.

source: Business Insider

It was AT&T’s third consecutive quarter losing accounts, the only three quarters AT&T has failed to gain linear video accounts since 2006.

For the year, AT&T was lost a net 355,000 subs and DirecTV lost a net 568,000, Ooyala says.

Comcast added a net 89,000 accounts for the quarter. For the year, Comcast was down 36,000 accounts.

But Comcast now seems to be including streaming customers to its linear video totals.

Dish Network lost 12,000 subs in the quarter and 81,000 over the year. Notably, Dish Network definitely now includes Sling TV customers in its account totals.

According to MoffettNathanson, Dish might actually have lost 141,000 linear subs in the quarter.

Time Warner Cable added 54,000 video customers in the last quarter and 32,000 over the year,

Verizon adding 20,000 FiOS television customers in the quarter, its lowest level of net additions  since 2006.

For the year, the six firms lost 781,000 accounts.

In 2014, the companies added 472,000 accounts. In 2013, they added 500,000 accounts.

Nobody will be particularly surprised by the findings. Virtually everyone considers the linear video subscription business a declining legacy business.