Shelter-in-place boredom hasn't stopped consumers from canceling cable: Cord cutting has accelerated during the COVID-19 pandemic.
That's according to new data from the nation's major cable and satellite TV providers. Comcast, AT&T, Dish, Charter and Verizon collectively lost 1.46 million pay TV subscribers during the second quarter, compared to 1.22 million subscribers during the same quarter last year.
Cord cutting has been on an upward trajectory over several quarters. In 2019, more than twice as many consumers canceled their pay TV subscription than during the prior year. The latest numbers indicate that 2020 will be even worse. During the first half of the year, the five big pay TV providers lost a collective 3.45 million subscribers. Over the first six months of 2019, 2.42 million consumers cut the cord.
These losses coincide with continued growth of online video subscription services. Netflix added 10 million new subscribers in Q2 alone, including close to 3 million in North America. Disney+ added 24 million paying subscribers worldwide during the quarter.
A closer look at the numbers suggests that there's further trouble ahead for the pay TV industry. Internet-based TV services, once heralded as a way to win cord cutters back, are also seeing massive defections. AT&T TV Now lost 206,000 subscribers during the first half of 2020 and now has only 720,00 paying subscribers, compared to 1.8 million at the end of June 2018. Dish's Sling TV, which managed to long stave off defections with comparably low prices, lost 337,000 subscribers over the first six months of this year.
Charter turned out to be the sole winner in Q2, adding 102,000 TV subscribers. But those gains could be short-lived. Charter offered customers affected by the COVID-19 crisis a break from late fees and forced disconnects as part of the FCC's Keep Americans Connected pledge, waiving $76 million in residential fees in the process. The company estimated in its Q2 2020 earnings report that it would otherwise have disconnected 208,000 residential subscribers across its internet, voice and TV services.
Most other major internet and TV providers followed the same pledge as well, likely preventing hundreds of thousands of additional disconnects. But the Keep Americans Connected program officially expired at the end of June, while the economic crisis continues — which means we'll likely see many more consumers cutting the cord throughout the rest of the year.
With that, cord cutting could reach a tipping point for TV industry economics. TV networks have long made up for subscriber revenue losses by increasing the carriage fees that service operators have to pay for each subscriber. Lightshed Partners analyst Richard Greenfield recently argued that in light of accelerated cord cutting, this strategy can only stretch so far. "It would appear that virtually every cable network group will have declining affiliate fees going forward," Greenfield tweeted.
In other words: Cord cutting is making the traditional TV business less and less profitable for everyone involved. That could accelerate a transition to new distribution models, including subscription services for premium content, and ad-supported online TV streaming for much of the rest of the industry.