The second quarter wasn't kind to media stocks. And that has gone for July thus far as well.
While media companies that own cable TV and broadcast networks differ in small and large ways, few have been immune to concerns about cord-cutting. And the second quarter appears to have been the worst quarter on record for declines in subscriptions to traditional video. Not only are more people dropping their cable TV or satellite TV service, the number of new subscribers is failing to offset the declines.
According to Wells Fargo Securities LLC, pay-TV providers led by Charter Communications Inc. (CHTR) - Get Charter Communications, Inc. Class A Report , Comcast Corp. (CMCSA) - Get Comcast Corporation Class A Report and Dish Network Corp. (DISH) - Get DISH Network Corporation Class A Report lost a net total of 1.28 million subscribers in the second quarter. That's an increase over the first quarter, when the net subscriber decline totaled 748,000. Wells Fargo media analyst Marci Ryvicker's tabulation is just a tad higher than a second-quarter analysis two weeks ago from UBS, which put the industry loss for the quarter at 1.2 million subscribers.
Given the acceleration in cord-cutting, media stocks have been falling. Since March 31, Walt Disney Co. (DIS) - Get Walt Disney Company Report has dropped 8.2%, Twenty-First Century Fox Inc. (FOXA) - Get Fox Corporation Class A Report has lost 13.1%, Discovery Communications Inc. (DISCA) - Get Discovery, Inc. Class A Report is down 9%, Scripps Networks Interactive Inc. (SNI) has declined 14.3% and Viacom Inc. (VIAB) - Get Viacom Inc. Class B Report has tumbled 26.4%.
To be sure, the advent of new online pay-TV services is cushioning the decline.
Second-quarter net subscriber declines totaled 858,000 subscribers when new services such as AT&T Inc.'s (T) - Get AT&T Inc. Report DirecTV Now are included in the tabulation. Yet it's important to realize that those services aren't necessarily generating the same revenue for network owners or pay-TV operators as traditional cable and satellite TV. From all indications, a multichannel service priced at roughly $40 per month may not even be profitable.
More concerning, the accelerating pace of subscriber declines in the second quarter came as AT&T stepped up promotions for DirecTV Now and its DirecTV satellite service, Alphabet Inc. (GOOGL) - Get Alphabet Inc. Class A Report launched YouTube TV and Hulu LLC, jointly owned by Disney, Fox, Comcast and Time Warner Inc. (TWX) , began selling subscriptions to its multichannel online service.
Despite the best efforts of a formidable industry, the pay-TV universe continues to shrink. The second-quarter decline equates to a 2.5% annual drop in traditional subscribers and puts the industry on pace to lose 3.4% of its base in 2017 after enduring a 1.5% decline in 2016.
For the immediate future, cord-cutting shows no signs of slowing.