The outlook doesn't look good.

Subscribers are abandoning pay-TV at a fast rate than ever before, media analyst firm MoffettNathanson reported on Wednesday, sending stocks in the sector tumbling. An estimated 762,000 subscribers terminated their cable or satellite TV service in the first quarter, five times higher than during the same period a year ago. The annualized subscriber decline of 2.4% was the largest ever.

"With most of the data now in, early returns suggest a litany of worst-evers," MoffettNathanson said.

Adding to fears that older media conglomerates are in slow decline, Time Warner (TWX) on Wednesday reported a first-quarter drop in ad-sales even as the company's programming was bolstered by an enviable selection of games from the NCAA college basketball tournament. Ad-sales slipped 2% in the quarter at the owner of TBS, TNT and CNN. 

The precipitous decline to start the year comes after 1.7 million consumers cut the cord, to use industry jargon, on pay-TV in 2016, both MoffettNathanson and industry consulting firm SNL Kagan reported earlier this year. 

The ominous trajectory cast a cloud Wednesday over media stocks as Viacom (VIAB) and AMC Networks (AMCX) (down 7% and 6.1%, respectively) as well as Scripps Networks Interactive (SNI) (5%) and Discovery Communications (DISCA) (4.7%). All four companies are widely viewed as particularly vulnerable to the fraying of the traditional cable TV bundle given that none of them own a broadcast network or rights to televise major sports. Live sports remains one of the few events that is rarely time-shifted.

For those reasons, all four have struggled to win a place on all of the new online pay-TV platforms that have launched in recent months. Networks from AMC, Viacom and Discovery weren't included in Hulu's new live TV service that began operating on Wednesday. Scripps' networks, which include HGTV and Food Network, are a part of Hulu's multichannel streaming service. 

Yet media companies that own broadcast networks weren't immune to the fears produced by the MoffettNathanson report. 21st Century Fox (FOXA) shares were down 5.1%, while CBS (CBS) stock dropped 3.3%. Both are dependent on fees from pay-TV operators as well as local TV station affiliates. As pay-TV operators report declines in subscribers, they pass those losses along to network owners.

The MoffettNathanson report comes a week after Disney's (DIS) ESPN announced its largest-ever layoff of on-air commentators, writers and producers. The layoffs hit about 10% of the 1,000 ESPN employees whose roles are among the highest profile at a network that has dominated U.S. sports coverage for more than 20 years. At the end of 2016, ESPN counted 88.4 million subscribers compared to 2011 subscribers totaled more than 100 million.

Disney shares had given up 2.6% on Wednesday afternoon.

The first-quarter decline in pay-TV subscribers is particularly concerning given that the steep drop came as household formation was "unusually strong" in the first quarter, the analysts said. Historically, new household ownership has translated into increased cable TV subscribers. But young people aren't signing up for cable and satellite TV as they did 20, 10 or even five years ago.

Instead, the total number of hours of cable TV watching is steadily declining as attention is diverted to everything from Netflix (NFLX) and Amazon (AMZN) Prime to Facebook (FB) and Alphabet's (GOOGL) YouTube. Network owners are hoping that they can stem the decline in pay-TV subscribers by launching online multichannel streaming services such as AT&T's (T) DirecTV Now, Dish Network's (DISH) SlingTV and Hulu's live TV service.

Yet after AT&T announced in February that DirecTV Now had attracted more than 200,000 subscribers at the end of 2016, the company last week was more cryptic about the platform's popularity coming out of the first quarter. AT&T would only say that DirecTV Now subscriptions in the first quarter "offset" losses at U-Verse, its DSL service. DirecTV Now was launched in early November.

"For the better part of fifteen years, pundits have predicted that cord-cutting was the future," MoffettNathanson said in the report. "Well, the future has arrived."

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