MoffettNathanson analysts estimate that 2.4 million US pay-TV subscribers cut the cord in the first three months of this year, making it the worst quarter on record.
“There was a time when we were confident ... that there was a floor for cord-cutting,” wrote analyst Craig Moffett in June, citing a “doom loop” in which media companies have moved their best programming off television and on to their streaming platforms – accelerating the collapse.
“Today, it is far less clear that there is a floor ... It looks increasingly like the genie can’t, or won’t, be put back in the bottle,” Moffett said, predicting that by 2028 there would be just 50 million US pay-TV subscribers left, down from nearly 73 million in 2023.
Both Paramount and WBD showed signs of improvement at their streaming services in the most recent quarter, and Disney said this week that its streaming business – which includes Disney+, ESPN+ and Hulu – turned profitable for the first time.
However, these platforms at best make a meagre profit and therefore do not offset the hole left from evaporating television channels. The result has been financial strain across the sector. Paramount said it would cut 15% of its staff.
Sports programming still has a stronghold on cable TV viewers, as results from Disney demonstrated. Its sports network, ESPN, posted a 4% rise in operating income even as its other linear TV channels reported declines.
The loss of valuable sports rights was among the “triggering events” that caused Warner Bros to take the US$9b writedown. In July the National Basketball Association failed to renew a valuable rights deal with Warner’s TNT network – ending a lucrative more than 35-year relationship.
Paramount’s writedown, on the other hand, was triggered by the complex deal agreed last month in which control of the company is set to change hands to Skydance Media, led by billionaire David Ellison.
Paramount chief financial officer Naveen Chopra said that the Skydance deal had triggered an evaluation of how much the group’s cable channels are worth.
“Obviously, linear [television] declines are part of the analysis here,” he said. “But the other part of this, that really drives the magnitude of the goodwill impairment charge, is the value that’s implied by the Skydance transaction.”
WBD shares dropped 9% on Thursday, while Paramount lost 2% before rising in after-hours trade.
- Financial Times