Report: As Pay-TV Services Customers Decline, Should Hulu + Live TV Dump NBCU, Paramount Channels?
The saturation and maturation of the streaming market has been much discussed of late. There are over 300 direct-to-consumer (DTC) streaming services in the United States, and it’s likely that not all will survive the next few years as customers are forced to choose which subscriptions fit their budgets, and what content they have time to consume.
That may lead some to think that linear pay-TV providers are due for a comeback. However, a new report from research firm MoffettNathanson throws cold water on those hopes. The report shows that pay-TV subscriber losses have continued to worsen and accelerate in the third quarter of 2022. Pay TV lost a total of 655,000 subscribers in Q3, a year-over-year decline of 6.2%.
Penetration of pay-TV services is at 61% of U.S. households, which is the lowest number since 1993, the year before satellite was introduced as an option. The numbers get even direr for linear TV providers when live TV streaming services — also known as virtual multichannel video programming distributors (vMVPDs) — like Hulu + Live TV, YouTube TV, fuboTV, and others are taken out of the equation. Cable and satellite providers are losing customers at a YOY rate of over 10%.
When vMVPDs were first introduced, it was assumed by many in the industry that they would help retain those customers who decided to cancel a cable or satellite subscription. After all, vMVPDs offered all the channel options of a pay TV subscription, with the stream-anywhere convenience of a DTC service. But as of Q3, vMVPDs gains account for only 28.7% of the losses that cable and satellite are experiencing, down from a high of 104% in 2018, when vMVPDs were attracting more customers than traditional pay TV sources were losing.
The report suggests that the only thing that will keep linear TV sources afloat in coming years is live sports. To that end, media companies should focus on keeping live sports linear, while shifting their entertainment content to DTC platforms. Not every media company will have the power to do this, but Disney can, since it already has both linear and DTC offerings in operation.
If Disney were to drop content from NBCUniversal and Paramount Global from Hulu + Live TV, it could drop the price of a subscription from $70 per month to the low $50s. Users would still be able to access their live local CBS or NBC stations on Paramount+ and Peacock respectively, and save money over what they were paying to get them on Hulu + Live TV.
Such a move would be similar to what T-Mobile attempted to accomplish with its live TV streaming service TVision in late 2020-early 2021. T-Mobile wanted to offer different subscription tiers with different channel offerings. The service folded in large part thanks to disputes with media companies over the way it packaged its channels, but Hulu + Live TV should experience much less friction in that regard.
The decline of linear TV will continue to accelerate, especially as media companies strip popular shows off networks in order to boost the profile of their streaming services. Disney has the power to stabilize the market by offering live sports on linear channels like ESPN while continuing to make entertainment for its streaming platforms. But the House of Mouse would do well to drop NBCU and Paramount Global from its Hulu + Live TV offerings.
Hulu Live TV is a live TV streaming service with more than 70 channels for $69.99/month. Hulu + Live TV base plan includes local channels, 33 of the top 35 cable channels, and regional sports networks (RSNs).