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Like cabin dwellers preparing for a storm, media investors are getting ready for second-quarter earnings reports that are likely to show the biggest quarterly decline ever in pay-TV subscribers.

Fewer subscribers likely will translate ultimately into lower fees for cable network owners, which in turn likely will spook media investors. Company executives will probably talk about stabilizing trends, but the reality of subscriber declines can only be explained so far.

All told, analysts are expecting a loss of more than 1.2 million video subscribers in the second quarter. If that's accurate, the decline would amount to a 2.4% drop for the quarter from the size of the pay-TV universe at the end of the second quarter in 2016. Many observers are bound to use the word "acceleration" given that the pay-TV subscriber decline in the first quarter was about 750,000 subscribers, or 1%.

Investors will get their first look at the extent of pay-TV subscriber declines when AT&T Inc. (T) - Get AT&T Inc. Report , owner of the DirecTV satellite service and a large but shrinking DSL business, reports its second-quarter numbers at the close of trading on Tuesday, July 25. AT&T will be followed on Thursday by Comcast Corp. (CMCSA) - Get Comcast Corporation Class A Report , Charter Communications Inc. (CHTR) - Get Charter Communications, Inc. Class A Report and Verizon Communications Inc. (VZ) - Get Verizon Communications Inc. Report .

As usual, much attention will be placed on Walt Disney Co. (DIS) - Get Walt Disney Company Report , owner of ESPN, the most-widely distributed and most expensive cable network. ESPN is often used as a barometer for the cable TV industry. Shares in the world's largest entertainment company, have gained 2.3% in 2017, trailing the benchmark S&P 500 index, which has advanced 10.8% this year. Disney reports on Aug. 8 along with Discovery Communications Inc. (DISCA) - Get Discovery, Inc. Class A Report , owner of nonfiction networks that already have lost subscribers over the past year.

Exacerbating matters, advertising sales in the second quarter appear to have been worse than the first quarter, when major media companies reported a collective 1% decline in ad revenue. Forecasts call for a second-quarter advertising decline of around 2.5%, a stark contrast with 2016, when national television advertising sales grew, punctuated by a 1.6% increase in the fourth quarter. 

All of this is likely to weigh on stocks of media companies that own lots of cable TV networks. In addition to Disney, which also owns FreeForm and a stake in A&E and Lifetime with Hearst Corp., other vulnerable network owners include Twenty-First Century Fox Inc. (FOXA) - Get Fox Corporation Class A Report , Scripps Networks Interactive Inc.  (SNI) , Viacom Inc. (VIAB) - Get Viacom Inc. Class B Report and AMC Networks Inc. (AMCX) - Get AMC Networks Inc. Class A Report . Fox has dropped 0.4% this year while Viacom shares are up 0.7% and Discovery stock has lost 5.7%. Scripps and AMC have gained on takeout speculation.

Comcast is a holding in Jim Cramer'sAction Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer and the AAP team buy or sell CMCSA? Learn more now.

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CBS Corp. (CBS) - Get CBS Corporation Class B Report , which reports on Aug. 7, has historically avoided cord-cutter fallout for the simple reason that it doesn't own a major traditional cable network. In an era of increasing video fragmentation, broadcast networks remain must-have channels, in part because of professional sports but also because of mass-market programming.

Despite all the cutting-edge shows coming out on Netflix (NFLX) - Get Netflix, Inc. Report , Hulu and Amazon (AMZN) - Get, Inc. Report Prime Video, people still love to watch "The Big Bang Theory." Go figure.

Not everyone is subscribing to the media stock doomsday scenario, though.

UBS media analyst Doug Mitchelson has argued that the bear argument on media stocks has been overplayed. Subscriber declines for the quarter, Mitchelson countered in a July 17 note, won't include digital pay-TV services such as YouTube TV from Alphabet Inc. (GOOGL) - Get Alphabet Inc. Class A Report or Sling TV from Dish Network Corp. (DISH) - Get DISH Network Corporation Class A Report . If digital pay-TV services are included, the overall subscriber decline in the second quarter is even with that of the first quarter, a drop of roughly 1.1%. (Digital pay-TV operators aren't revealing their subscriber totals.)

In talks with industry sources, Mitchelson said it's more likely that the pay-TV subscriber decline in the second-quarter didn't exceed the first quarter.

"This is a radically different outcome than what consensus assumes, in our view, and suggests that [the first-quarter] jump in cord cutting was either an anomaly or related to the timing of year-end price increases and post-pay TV mergers promotional strategy shifts," Mitchelson wrote.

That may be true, but the economics of the traditional $85-or-higher pay-TV bundle aren't the same as YouTube TV at $35 per month or even AT&T's DirecTV Now service at $40 per month. Bernstein Research media analyst Todd Juenger calls it the "skinny bundle head fake." Cable TV owners are unlikely to offset their traditional pay-TV revenue losses with subscriptions from digital pay-TV services given the much smaller pie. It's also a lot easier to share an online pay-TV service among friends and family members than a cable TV box.

The new wave of digital pay-TV services may be gaining subscribers, but the overarching trend is away from traditional TV. With Netflix gaining ever more subscribers in the quarter, cable networks are left to fight over a finite number of viewing hours. All eyes will be on the country's largest pay-TV providers as their results offer a snapshot of the current state of the media business.

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