The rate of pay-TV's decline is slowing
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For the first time since 2017, pay-TV subscriptions actually grew quarter over quarter, adding 303,000 net new subscribers in the most recent period, according to new data from equity research firm MoffettNathanson.
Why it matters: It offers hope that the live video subscription business can survive longer than expected, but only if video providers are willing to offer streaming bundles with their cable and satellite packages.
Zoom in: The rate of decline for pay-TV subscriptions has actually slowed over the past five quarters, which serves as proof that last quarter's spike wasn't just a fluke.
- Most of the recent growth has stemmed from net new subscriber additions to digital "skinny bundles," or virtual pay-TV companies like YouTube TV, Sling TV or Hulu with Live TV.
Yes, but: While those offerings are still attracting new customers, their growth rate is slowing too.
- Digital skinny bundle subscriber additions have been growing at a rate of 4.6% for the past three quarters — the slowest rate since skinny bundles were first introduced in 2015.
- To date, skinny bundles have not been able to fully make up for the overall decline in traditional pay-TV subscriptions. Analysts don't predict they ever will.
Reality check: Last quarter's growth was almost certainly tied to the start of football season, which suggests pay-TV additions during subsequent near-term quarters may not be as robust.
Zoom out: Recent and unexpected growth is being fueled by new affiliate deals between cable companies and content owners that give younger consumers access to streaming services along with their live-TV plans.
- Charter, which first championed this model with its landmark distribution deal with Disney in 2023, has paved the way for pay-TV providers to broker these types of deals and start investing in subscription video sales again.
- A year ago, Charter's video subscriber base was shrinking at nearly 10% per year, per MoffettNathanson. Last quarter, that decline rate shrank to just 3.5%.
What to watch: Charter, the largest cable company in the country, has agreed to merge with Cox, the third largest.
- That deal, which is expected to close next year, could see Charter bringing its new packaging strategy to Cox's cable customers.
Disclosure: Axios is owned by Cox Enterprises, which is selling Cox Communications to Charter.
Editor's note: This story has been corrected to note that Charter (not Cox) could bring a new pay-TV packaging strategy to customers.
