Allow me to relay a few recent events in the TV world that might not seem too significant on their own, but together portend disaster for the bloated TV bundle:
- On Tuesday, Disney announced a 3-percent decline in pay-TV profits last quarter, driven by ESPN's higher programming costs and reduced subscriber base. ESPN has lost 12 million subscribers since since 2011, according to Nielsen, and last month, the company laid off roughly 100 employees, or about 10 percent of its “front-facing” talent.
- Just a day earlier, Discovery Communications CEO David Zaslav referred to streaming bundles such as Sling TV and DirecTV Now as “a bit of a stuffed turkey.” He then called for a sports-free TV bundle in the ballpark of $10 per month. Discovery’s latest earnings report also reveals a sting from cord cutting; its subscriber count dropped 3 percent year-over-year last quarter. The company admitted that this was a “slight acceleration” from the quarter prior.
- As a whole, pay-TV providers lost 762,000 subscribers in what is supposed to be a solid growth quarter, according a report last week by MoffettNathanson analyst Craig Moffett. That’s despite favorable household growth of 157,000 homes since the previous quarter, and 500,000 homes year-over-year. “Whatever the cause, it seems naïve to suggest that we have seen the worst of the trend. Instead, this is almost certainly just the beginning,” Moffett wrote in a research note.
The takeaway here is not merely that the TV bundle is having a bad time, but that it’s being ripped apart by an intertwined set of forces, including a steady decline in pay-TV bundle participants, the escalating cost of sports in TV bundles, and frustration from non-sports TV networks that feel hemmed in by the current system.