Cable and satellite TV providers are losing millions of subscribers every year as their customers decide to switch to streaming TV services. In response, these companies are deploying a variety of tactics from skinny-bundle streaming options to proprietary streaming devices. But none of these tactics have stemmed the tide of subscriber losses. The days of being TV providers may be over as their businesses increasingly rely on providing internet service.
AT&T U-verse and DirecTV
AT&T gets hit with both barrels because it operates two declining pay-TV services. Customers who subscribe to AT&T’s fiber-optic broadband service can subscribe to U-verse, a cable-like and cable-priced TV subscription service. AT&T also owns the satellite TV provider DirecTV Now. Over the past three years, both services have lost more than 2.3 million subscribers. That trend continued this year with the loss of an additional 544,000 subscribers in the company’s first fiscal quarter.
Given the similarity in branding, you might think AT&T’s over-the-top streaming TV service DirecTV Now was part of the customer retention strategy. However, the company’s executives have said that only 10% of DirecTV Now’s customers came from U-verse or DirecTV. Over the past few years, DirecTV Now subscriber growth has offset declines in the other businesses. Recent price hikes and the end of DirecTV Now’s aggressive promotional campaigns have now reversed that trend.
Keeping pay-TV customers isn’t the focus of AT&T’s other streaming service, AT&T WatchTV. Instead, AT&T has positioned WatchTV as a free benefit for the company’s wireless customers in the lead-up to 5G deployment.
This skinny bundle offers more than 40 live TV channels and on-demand content for only $15 per month. AT&T can offer this low price because it does not have to pay expensive carriage fees to broadcast networks or sports channels. Instead, the WatchTV lineup consists of lifestyle and entertainment channels like HGTV as well as AT&T-owned channels like CNN.
Reports emerged last year that AT&T was developing its own streaming device based on Google’s Android TV operating system. TechCrunch reported that AT&T executives admitted that this device would be their way to migrate U-verse and DirecTV customers to DirecTV Now. CFO John Stephens went into more detail the following quarter, Multichannel News reported. The user-installable device would make AT&T’s pay-TV business more profitable since they would no longer have to send employees to install fiber connections or satellite dishes. “The only truck roll is the UPS truck,” Stephens said.
In Comcast’s latest quarterly earnings report, the company reported that its Xfinity cable TV service had a year-over-year loss of 358,000 subscribers. This less-than-2% decline was better than the rest of the industry and due, in part, to Comcast’s Xfinity X1 platform. Introduced in 2014, X1 is a cloud-based platform that replaced Comcast’s traditional cable TV distribution technology. Now X1 is the basis for a range of streaming TV options for Comcast’s internet-only customers.
Xfinity Stream is an over-the-top streaming TV service that Comcast customers can bundle with their internet service. Prices start at $40 per month for 60 Mbps service and 10 TV channels. For $135 per month, customers get 400 Mbps service and more than 260 channels, including either Netflix or HBO. Xfinity Stream comes standard with the company’s traditional cable TV plans as well.
A new option for Comcast’s internet-only customers is the Xfinity Flex set-top-box. For a $5-per-month rental fee, customers can watch live video streams from free streaming TV providers like Pluto TV and Tubi. They can also access their on-demand subscriptions through apps from HBO, Netflix and other services.
Charter’s internet-only customers can subscribe to Spectrum TV Choice, an over-the-top streaming TV service. It offers live streams of more than 170 TV channels as long as customers are on their home network. When mobile, only around 60 channels are available.
Spectrum TV Essentials is a skinny-bundle option launched last February. For $15 per month, subscribers get more than 60 lifestyle and entertainment channels. Like AT&T’s WatchTV, sports networks and local broadcast channels are not available. Customers access the stream through the Spectrum TV app which is available on most mobile and streaming platforms.
Of all the pay-TV providers, Dish Network is in the worst position. Satellite TV providers are the hardest hit by customer abandonment and, unlike AT&T, Dish isn’t cushioned by its own wired broadband service. Variety reported that Dish lost more than 1.1 million customers in 2018. Reuters reported that this trend continued into the first quarter of 2019 as another 260,000 subscribers walked away.
Unfortunately, Dish Network executives do not seem to have a coherent plan. In comments reported by Deadline, the executives blamed AT&T’s blackout of HBO. Furthermore, Dish Network chairman Charlie Ergen explained to investors, the company he founded is “a rural company at heart…. We already own satellite broadband in rural America…. We think we’re somewhat insulated in some of the things that are going on in linear TV.”
The company does not have a customer retention strategy that relies on streaming even though Dish Networks owns over-the-top streaming service Sling TV. Like DirecTV Now, few of the departing satellite customers are switching to Sling TV.
Deploying a 5G residential broadband network seems to be Dish Network’s solution to its fading satellite business. However, the analysts are increasingly skeptical that Dish can afford the multi-billion dollar cost that entails.
Is Any of This Enough?
Increasingly, industry executives accept the fact that the days of being defined by TV are over. Comcast CEO Brian Roberts made this starkly clear in comments Variety reported from an industry conference in February. “Our largest, most profitable business is broadband… Let’s put our attention on broadband.”
This may be why the efforts to stem the tide seem like cases of too little, too late. Proprietary skinny bundles and devices can’t compete with third-party options like Hulu + Live TV and YouTube TV, which carry similar features, including cloud DVR and digital TV streaming guides. Cable and satellite providers see the writing on the wall and are simply minimizing their losses. In the end, whether customers stream from them or from a third party, the cable companies still get the broadband revenue.