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No one wants satellite TV any more

Published Mar 18th, 2018 12:00PM EDT
Streaming services vs cable 2018

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The entire pay TV industry is being shaken by the emergence of cord-cutting, also known as people realizing they don’t have to pay $105 a month for TV. Cable TV had an awful 2017, but a new report confirms that it’s satellite TV that’s really feeling the hurt.

Satellite TV was down nearly 1.7 million subscribers in 2017, claims a Kagan report seen by Multichannel. Cable dropped nearly a million subscribers over the same period, but cable subscribers make up a far larger share of the market than satellite.

Part of the loss is attributable to one-off events, like the hurricanes that swept the US in 2017. AT&T said that hurricanes in the southeastern US and earthquakes in Mexico last year hurt its subscriber base, back when its Q3 losses were particularly heavy. At the time, analyst Craig Moffett said that it is “becoming increasingly clear that the wheels are falling off satellite TV.”

The big hope for AT&T, the owner of the largest satellite TV company in DirecTV, is to transition customers to a streaming alternative. AT&T has pointed to the rapid subscriber growth of DirecTV Now, its streaming pay TV service, as a reason for optimism.

In a way, AT&T has a point. Kagan’s 2017 report suggests that there are 3.3 million streaming pay TV subscribers in the US, with the market dominated by Sling and DirecTV Now. But it’s increasingly unclear whether the current streaming TV setup is sustainable. AT&T offered aggressive promotions to its wireless customers to persuade them to sign up for DirecTV, with the price after discount falling as low as $10 per month. At that price, AT&T is losing money on every subscriber it signs up, thanks to increasingly expensive deals with the content owners.

Even at the $35-40 per month price that most streaming services charge, it’s unclear whether anyone is making any money. One industry source told BGR that the streaming services are falling a few dollars per month short of covering the cost of programming. Networks have been slowly increasing the cost of programming for the last few years, especially for must-have channels like sports, but thanks to the competition in the streaming TV market, the streaming services haven’t been able to pass the cost on to consumers. Instead, margins have been nibbled away, leaving an expensive-to-run service that barely breaks even.

The result is likely to be good for consumers, but bad for the telecoms companies. People may well sign up for streaming services at record numbers, replacing the customers lost from satellite and cable, but the profits that telecoms make on cable and satellite won’t be replaced.

Chris Mills
Chris Mills News Editor

Chris Mills has been a news editor and writer for over 15 years, starting at Future Publishing, Gawker Media, and then BGR. He studied at McGill University in Quebec, Canada.