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Analyst: Streaming Growth Is Slowing, Pay TV Is Falling

Tom Wilton

Wells Fargo analyst Steven Cahall has issued a new investor note, concluding that, when viewed in aggregate, there has been a slowdown in streaming subscription growth across direct-to-consumer services such as Netflix, HBO Max, and Disney+.

Cahill has trawled through multiple recent earnings reports and found that there were 29 million new subscriptions across 12 different services during the first quarter of the calendar year. That figure pales in comparison to the 42 million fresh sign-ups from the first three months of 2021.

Additionally, Cahill has counted a total of 585 million subscribers across the dozen services, which accounts for an increase of 5.2% over Q4 2021. However, that quarter was particularly robust, in which subscriber numbers collectively grew some ​​9.5%.

Cahill projects growth for the streaming industry will continue, estimating there will be 701 million customers paying for at least one video subscription service by the end of 2022. He also anticipates that the number will reach 808 million by the close of next year.

The analyst’s report also dives into revenue from subscriptions and ad-supported content. On this, he says companies pulled in $14.2 billion in the Q1, up 5% on the previous quarter, and 28% year-on-year. Still, Cahill notes, the industry had experienced quarterly increases of 8% to 9% for the better part of three years prior, so the first three months of this year are a considerable slowdown.

Pay TV is Continues to Fall

While cord-cutter rates look like they’re starting to level off, the decline for traditional cable providers is gathering pace. According to Cahill’s sums, some 2.2 million pay-TV customers quit those subscriptions in the first quarter of 2022. Effectively, that equates to a 4.5% year-over-year drop.

Cahill’s calculations show that there are now approximately 84 million homes in the U.S. paying for live TV streaming services. He posits that the decline can be partially attributed to companies such as Sling, Hulu, and YouTube TV raising their rates. And the near future doesn’t look great either: Cahill expects pay-TV figures for the whole of 2022 to be down some 5.8% when compared to 2021.

“While industry sub declines may be worsening we think that is largely expected by investors and companies given all the content going onto streaming,” says Cahill. “We don’t think traditional Media assets are priced to expect cord cutting to remain stable or improve long-term. We view sub declines that are down mid-single-digits as remaining stable.”

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