U.S. IPTV Providers Are No Longer Bucking the Trend

U.S. cable and satellite TV providers have been buffeted in recent years by subscriber loss. Indeed, the only segment in the U.S. pay TV market in the past several years to routinely post net subscriber gains have been the IPTV providers—principally AT&T U-Verse and Verizon FiOS. But the telco run of subscriber gains that marked those companies’ early entrance into the market seems to have run its course.

Indeed, the reversals began in 2015, when AT&T finished the year with 5.6 million subscribers, down modestly from 2014’s 5.9 million figure. But 2016 was rougher with U-Verse seeing a 24 percent drop in subscribers, plunging to 4.3 million subscribers. 2017 has been no better, AT&T kicked off the first quarter of the year by hemorrhaging 233,000 subscribers. The second quarter was equally grim, with a bloodletting of 195,000 subscribers. Although both IPTV providers are losing subscribers, AT&T is a special case as its pay TV focus has clearly shifted toward boosting DirecTV at the expense of U-Verse.

Verizon has no place else to shift its focus. The telco fared far better in 2016. Outside of a loss of 41,000 subscribers in the second quarter of the year, the company was able to post gains in the other three quarters. 2017, however, has seen two consecutive quarters of retrenchment. Verizon lost 13,000 subscribers in the first quarter and 15,000 in the second.

So why have U.S. IPTV providers hit the skids? In part, they’re suffering the same downturn that has afflicted cable and satellite companies who have been losing customers fairly steadily over the same time period. Even with AT&T’s focus shifted away from U-verse toward DirecTV and its new DirecTV Now service, it still had an overall net loss in Q2.

The growth of Internet-delivered skinny bundles has also taken a bite out of traditional pay TV subscriber growth. Services like Sling TV and DirecTV Now have grown in the wake of the declining pay TV services, although not enough to make up for their traditional service losses. For AT&T and Verizon, piggybacking on the skinny bundle is the key to future growth in a market that is now much less hospitable to endless growth.