Conventional cable television companies are still bleeding customers, led by the likes of AT&T (T -0.44%) brand DirectTV and Comcast (CMCSA -0.84%). The latter lost another 273,000 paying Xfinity subscribers last quarter, while the former shed another 590,000 premium TV customers in the same three-month span. Both setbacks extend a long-standing cord-cutting trend.
There's another curious trend taking shape within the cable media arena that's also worth noting. Streaming cable services from providers like FuboTV (FUBO) and Alphabet's (GOOG -1.55%) (GOOGL -1.45%) YouTube TV continue to add to their customer ranks.
This is clearly an encouraging shift for linear cable players that are able to make such a pivot, but it raises a big question: Why?
Image source: Getty Images.
Bucking the trend
Some of the companies that offer this slightly cheaper alternative to conventional cable service can be a bit cryptic when it comes to divulging specifics. For instance, during Alphabet's third-quarter 2020 conference call, CEO Sundar Pichai would only reveal that "YouTube TV now has more than 3 million paid subscribers." It was the first update of the service's headcount since its fourth-quarter 2019 conference call, when he commented that there are now "over 2 million YouTube TV paid subscribers."
Other providers are more forthcoming. While satellite cable outfit Dish Network (DISH) reported numbers that translate into a loss of 60,000 of its now 9.02 million Dish customers at the end of Q2, its Sling TV streaming cable platform picked up another 210,000 paying users. That's nearly a 10% increase in its customer base.
Sling TV wasn't an outlier either. FuboTV added 169,000 subscribers, bringing its base to 455,000. Walt Disney (DIS -0.89%) reported around 700,000 people signed up for the version of Hulu that includes live cable service during the third calendar quarter of 2020. Alphabet didn't provide a figure as of the second quarter of the year, but if MoffettNathanson's estimates are on target, YouTube TV picked up about 500,000 new customers last quarter.
All told, including all four over-the-top cable services noted here plus the streaming cable customers AT&T lost, the digital cable business added over 1.5 million customers during the three-month stretch ending in September. Perhaps more important, digital cable providers picked up more customers last quarter than conventional, linear cable lost. Perhaps most important of all, last quarter's subscriber gains extend -- and accelerate -- progress that started to gel a couple of years ago.
Data source: Company investor reports and MoffettNathanson estimates. Some data extrapolated using company-reported data and published estimates. Chart by author.
Connecting the dots
This underlying trend speak volumes. Consumers may be eschewing cable television piped into their homes by coaxial cords due to sky-high prices. But they seem to be tolerant of streaming cable alternatives like FuboTV and Sling TV.
Two factors may be in play.
One of them is price. While YouTube TV's monthly price of $64.99 and Hulu + Live's starting price point of $54.99 aren't quite living up to the previous full promise of cost-effective skinny bundles (and a la carte options), digital cable is indeed proving to be more affordable than "regular" cable. DoxoINSIGHTS suggests the average monthly cable bill in the United States now stands at $109, nearly $40 of which Consumer Reports says are cable fees that are otherwise avoided by using streaming cable alternatives.
The other element at work here is most likely to be flexibility. Whereas consumers may have a limited choice of conventional cable providers where they live, as long as they have broadband internet they can select whichever streaming cable service they like. With more available options, consumers are more likely to find a solution that's more compelling than their local cable provider's offerings.
Regardless of customers' reasoning, cable powerhouses like Comcast and Charter Communications' (CHTR -0.89%) Spectrum can't exactly say the cable market is simply shrinking. It's changing, to be sure. It's just that not all cable companies are doing enough to change with it. Comcast may want to think beyond Peacock, and AT&T may want to think beyond HBO Max.
