Despite Cable Bundle Shrinkage, Sports Fans Are Sticking Around

·7 min read

Given the accelerated rate at which Americans are ditching out on the cable bundle, it’s probably time to upgrade the shopworn “cord-cutting” metaphor in favor of a more emphatic term, one that functions as a sort of semantic lapel-grabber. It’s now perhaps less accurate to suggest that consumers are dispassionately severing the links to their 500-channel pay-TV packages than it is to invoke a plucky iguana high-tailing its way up the face of a beachside rock formation as dozens of hungry snakes close in.

As much as snakes can’t really help looking like sentient coaxial cables, it’s understandable why iguanas (and an awful lot of people) don’t want much to do with either of the coily monsters. Like the fleeing lizard from that BBC nature show, subscribers looking to cut ties with the bundle have turned on the afterburners; as such, churn rates are higher than they’ve ever been.

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According to a new report from MoffettNathanson, traditional pay-TV distributors saw their subscriber counts fall by 9% in the first quarter of 2021, as the number of cable, satellite and telco accounts dropped to 66.1 million households. That translates to an erasure of 6.51 million subs in the space of a calendar year, and brings the bundle’s penetration all the way down to just 54% of the country’s 122.4 million TV homes.

Go back just three years to the first quarter of 2019, and the bundle roster has shrunk by 25%, as no fewer than 21.6 million pay-TV accounts have been shuttered in the interval. In five years, the number of bundle backers has dropped 31%, good for a loss of 29.4 million households, while a comparison to the first quarter of 2012, back when 90% of U.S. TV homes subscribed to a standard pay-TV package, makes for a net loss of 37.1 million accounts.

If that seems like a lot, it’s because it is.

While no operator is exempt from the ravages of churn, the telco and satellite providers are shedding subscribers at a vertiginous clip. Brands like AT&T and Horizon over the last year lost 14% of their TV subs, while satellite players DirecTV and Dish Network saw their combined video base shrink by 12%. The leading cable providers (Comcast, Spectrum, etc.) have lost 7% of their video subs in the course of the last 12 months, although the sector’s 41.7 million subs easily outshine satellite-TV’s base of 18.6 million customers. (The telco headcount is now down to 5.83 million video subscribers.)

As MoffettNathanson analyst Craig Moffett points out, the satellite numbers have plunged at a time when the dish duopoly has “largely abandoned the sports viewer.” In dropping NESN back in December, Dish Net divested itself of its last remaining RSN; since July 2019, when Dish chairman Charlie Ergen told investors, “It doesn’t look good that the regional sports networks will ever be on Dish again,” the company has lost 1.57 million video subscribers.

For its part, DirecTV is about to close out its $12 billion stewardship of the out-of-market NFL Sunday Ticket premium, which for the better part of the last 30 years has served as a key differentiator in its war on cable. In the last two years, DirecTV has shed 4.64 million subscribers.

While the steady defection from the bundle has wreaked havoc on overall TV trends—in June, the number of people watching broadcast and cable TV was down 26% compared to the analogous period in 2019—sports appears to be capitalizing on its built-in competitive advantage. Hard data is hard to come by (much of the available research has been culled from the rigorously non-scientific practice of issuing sentiment surveys), but the Nielsen ratings would seem to support the notion that sports fans are far less likely to cut the cord than their sports-averse counterparts who prefer scripted/pre-recorded content.

Except for the outlier that was the 2022 NBA Finals, which followed a period of overall postseason gains, nearly every key sporting event has returned to pre-pandemic viewing levels. And while some of the gains can be chalked up to the artificial lift provided by the addition of out-of-home deliveries to the Nielsen calculus, sports as a whole continues to dominate the TV landscape in such a way that seems to indicate that more fans than non-fans are sticking with the bundle.

If nothing else, the rate at which sports-centric networks are losing traction is demonstrably lagging the overall pay-TV marketplace. While the bundle in the last year contracted at a rate of -9%, ESPN in the same period has had to contend with a loss of 5% of its sub base, while FS1’s reach has fallen 4%. The sub losses (-9%) for cable channel TNT in the last year were consistent with the general state of play, although the Turner Sports network is more of a hybrid offering than its stick-to-sports rivals. Last year, TNT generated 21% of its overall impressions care of its live NBA coverage, while the channel’s movie library was responsible for 42% of its deliveries.

Other hybrid sports/entertainment networks, such as USA and TBS, finished down in that -9% range.

While the sports networks may be having an easier time of it than the rest of the TV landscape,  they’re not getting much help from the virtual MVPDs. As the subscription fees for the once-cheap cable alternatives continue to soar, consumer interest is on the decline. In the first quarter, fewer than 33% of consumers who left the bundle switched to a compensatory vMVPD; a year ago, the conversion rate was 42%.

“Decline rates have accelerated, conversion rates have fallen, seasonal [churn] has increased,” Moffett said. “There’s not a lot of good news here.”

For what it’s worth, while vMVPDs may help take some of the sting out of the bruising bundle departures, those boosts are limited to the national cable networks. As is the case with Dish Network, the virtual TV packages have dropped the pricey RSNs in order to keep a handle on escalating sub fees. While it is undoubtedly cheaper to drop a $7 RSN from the lineup, the costs of carrying basic-entertainment channels are soaring—so much so, that in a matter of just three years, fubo TV’s lowest-priced plan has jumped from $45 per month to $70.

That live sports remains the mitochondria of the legacy TV model was made particularly evident during the early days of the coronavirus pandemic, when Americans retreated into the comfort of their homes to wait out the disease. During the first 24 weeks of the 2019-20 broadcast season, TV usage was down 7%, but the numbers began to rise once everyone found themselves stuck inside with the tube. For a six-week stretch (March 16-April 26, 2020), viewing levels began to creep up by as much as 5%, but in the absence of any live sports, the rally proved short-lived.

That TV couldn’t fully capitalize on a national shutdown speaks volumes about generational media consumption and the perceived value of much of the available entertainment programming. (Nielsen would later cop to having undercounted a significant chunk of the spring TV audience, but even when adjusting for any discrepancies, the turnout during the early days of quarantine was far from robust.) Without sports, there was little to capture the interest of younger viewers who were raised in an everything-on-demand universe. Even when there was nothing else to do—on the first day of New York’s shutdown, the number of subway riders plummeted from 5.57 million straphangers to 1.79 million—the prospect of canned entertainment held little appeal for a subset of consumers who spend five hours a day staring at their phones.

By the time the viewing season ended in late May, the overall deliveries for the 35-week campaign began creeping back down to pre-outbreak levels, with year-over-year usage dropping 6%. Without the draw of baseball, basketball, hockey or soccer, the younger viewers who’d sampled the hitherto-unfamiliar offerings of linear TV—the laugh-track-haunted sitcoms, the cop- and lawyer- and hospital dramas—had hightailed it back to their Instagram and TikTok accounts.

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