YouTube TV: A Pit Stop on the Road to Cord Cutting or the Future of Pay-TV?

Five big questions re: cord cutting:
1) How do Americans receive television?
2) How many homes subscribe to a pay-TV bundle?
3) What share of pay-TV subscriptions is streaming?
4) Are streaming pay-TV services replacing all the subscribers leaving traditional pay-TV?
5) Is time spent with cable declining at the same rate as subscribers?

Setting the table: YouTube TV made headlines with the addition of NFL Sunday Ticket.  Many expect subscribers to grow beyond their 6.5M households (5% of all HH).

YoY change in pay-TV subscribers:
1) YouTube TV - ↑ 1.5M
2) Charter - ↓ 921K
3) Comcast - ↓ 2.1M

Big question #1: How do Americans receive television?

Share of U.S. TV households by source according to Nielsen:
1) Traditional pay-TV - 46%
2) Broadband-only - 40%
3) Antenna (OTA) - 14%

What’s next: According to Activate Consulting, broadband-only households will surpass pay-TV households by 2027.

Why this matters: This trend can be seen in recent media rights deals such as the Las Vegas Golden Knights (NHL) and Phoenix Suns (NBA).  Both teams are shifting from regional sports networks (RSNs) to broadcast and streaming.

Bottom line: In both markets, the broadband-only audience is already larger than pay-TV.  

Both teams have two primary goals in moving to broadcast/streaming:
1) Grow reach beyond the ≈ 2% of households (HH) RSNs delivered last season.
2) Recreate the lucrative revenue stream RSNs provided since each pay-TV subscriber paid for it whether or not they watched.

PSA: Nobody has figured out how to recreate the economics of lucrative pay-TV bundles. For example, digital video (including streaming) accounts for 55% of our time but only 27% of revenue for the media industry.  

Bottom line: Traditional TV generates ≈ 3X the revenue per hour of digital video.

Big question #2: How many homes subscribe to a pay-TV bundle?

Quick answer: 72M (51% of all HH)

YoY change in pay-TV subscribers:
1) Traditional pay-TV - ↓ 6.6M
2) Streaming pay-TV - ↑ 1.7M
3) Total pay-TV - ↓ 4.9M

Total pay-TV subscriptions (YoY growth):
1) 2018-Q3 - 92.6M
2) 2019-Q3 - 89.7M (↓ 3%)
3) 2020-Q3 - 82.9M (↓ 8%)
4) 2021-Q3 - 81.3M (↓ 2%)
5) 2022-Q3 - 77.2M (↓ 5%)
6) 2023-Q3 - 72.3M (↓ 6%)

Big question #3: What share of pay-TV subscriptions is streaming?

Quick answer: 21%

Streaming pay-TV subscriptions (YoY growth):
1) 2018-Q3 - 6.5M
2) 2019-Q3 - 8.7M (↑ 33%)
3) 2020-Q3 - 8.0M (↓ 8%)
4) 2021-Q3 - 11.8M (↑ 48%)
5) 2022-Q3 - 13.8M (↑ 17%)
6) 2023-Q3 - 15.5M (↑ 12%)

Streaming share of pay-TV subscribers:
1) 2018-Q3 - 7%
2) 2019-Q3 - 10%
3) 2020-Q3 - 10%
4) 2021-Q3 - 15%
5) 2022-Q3 - 18%
6) 2023-Q3 - 21%

Big question #4: Are streaming pay-TV services replacing all the subscribers leaving traditional pay-TV?

Quick answer: No, but the gap narrowed in the most recent quarter.  Traditional pay-TV lost 1.8M HH, while streaming pay-TV added 1.3M (74%).

Big question #5: Is time spent with cable declining at the same rate as subscribers

Quick answer: No. Time spent is declining 2X as fast as subscribers.