Sports Were the Life of the Party for TV. Now They Just Might Kill It.

The state of the pay-TV business is a bit like the winding-down phase of one of those off-campus keggers that you maybe recall from school, the undergrad parties where you forked over five bucks to the grouch at the door in exchange for a red Solo® cup and a whole lot of adolescent noise. Maybe you got there late because the pregaming got a little out of hand, but it’s hard to shake the feeling that the fun part is over.

Sure, the party may grind on for a bit, but there’s no use in holding out for a second wind. The keg’s not killed, exactly, but it’s floating, and while there are still a bunch of people milling around the kitchen, they’re an older crowd: townies, the dutifully employed. And you don’t even want to know about the bathroom situation. If sheer inertia doesn’t snuff this thing out, the increasingly frazzled-looking hosts will. You don’t gotta go home, but you can’t stay here, etc…

If the cable-bundle party isn’t quite dead yet, it’s looking mighty green around the gills. In the last 10 years, cable, satellite and telco-TV operators have lost a little more than 49 million subscribers, a decline that’s driven overall penetration from 90% of U.S. TV households to just 41%. And while those comps from a decade ago are already a buzzkill, the more recent trends are perhaps even more disconcerting. According to a new MoffettNathanson report, the cord-cutting bug is multiplying rapidly; in the first quarter of 2024, 1.9 million subscribers called it quits with their pay-TV provider.

The latest round of defections has reduced the bundle’s tally to 51.4 million subs, a record 12.3% loss versus the year-ago figure (58.6 million). In the past two years, 14.7 million homes have parted ways with the bundle, and the impact of all that collective quitting is plain to see in the Nielsen ratings. During the 2023-24 broadcast season, the Big Four’s primetime entertainment series averaged just 477,499 adults 18-49 per airing, which amounts to one-half of 1% of the 131.88 million souls who are members of the target demo. That marks a 12.3% drop compared to the previous season’s turnout and a staggering 26.8% plummet from just two years ago.

While the declines among the under-50 set are disproportionately high, that’s largely a function of selective omission. If we add the number of bundled subs to the 19 million virtual MVPD (Hulu Live, Sling TV, et al) subscribers, the total pay-TV universe has contracted by 13.2% over the last two years, which is more in keeping with the concurrent 17% drop in overall U.S. TV consumption since 2021-22.

With a headcount of some 70.4 million traditional and vMVPD subs, the hybridized tally is somewhat less gloomy, although that silver lining is attached to a roiling thunderhead. Per MoffettNathanson, the alternative delivery systems aren’t growing quickly enough to significantly offset the accelerated losses from the bundle, as “only roughly one in four of those lost traditional linear subscribers was recaptured by an vMVPD.” For what it’s worth, the first quarter is historically a tough sell for the digital-TV packages, as many sports fans tend to churn away from their vMVPD contracts as soon as the NFL season wraps.

What’s particularly unsettling about this latest quarterly dive is that even the dominant player in the vMVPD space lost ground. YouTube TV in Q1 registered its very first loss, as some 150,000 consumers canceled their subscriptions. By way of comparison, the streamer added nearly 800,000 subs in the football-friendly fourth quarter of 2023. Among the vMVPDs, only DirecTV Stream managed to grow its sub base during the first three months of this year.

The downstream effects aren’t simply limited to the ad-supported cable networks that boasted more than 100 million paying subscribers as little as nine years ago. (ESPN, which once ruled the roost with around 101 million subs, is about to slip below the 70 million threshold. Nobody’s walking away from this without a scratch; per Nielsen, FS1, TNT, TBS and USA Network are all in the same boat as the Worldwide Leader.)

The decline of pay-TV and our collective disregard for antennae and rabbit ears have hampered the over-the-air networks as well, with broadcast penetration slipping from 84% at the start of 2020 to 66% now. Affiliate shrinkage has winnowed the Big Four’s reach down to just 82.5 million of the country’s 125 million TV homes, down from 101 million just four years ago.

In the near term, sports appears to be keeping the lights on at the networks, although some executives can’t seem to stop firing BBs at the bulbs. On the one hand, the people who are still watching TV—and they are legion, despite all the frenetic Costanza-ing that’s been going on—are demonstrably using their sets as a delivery vehicle for football. In 2023, sports accounted for a record 97 of the 100 most-watched TV broadcasts here in the U.S., with the NFL claiming 93 of those top spots all on its lonesome.

While those usage patterns and deliveries seem to suggest that TV will thrive as long as we all continue to enjoy watching football, the analysts say otherwise. MoffettNathanson sees the bundle shrinking all the way down to 25.9 million subs by 2028, with vMVPDs holding their own at 24.7 million subs. That gets us to a grim future where fewer than one-third of all occupied U.S. homes subscribes to a pay-TV service; at present, we’re looking at 46.9%.

Chalk it up to what the analysts refer to as a “doom loop.” Whereas live sports may be the last defense against an extinction-level event, the network suits are effectively advancing the hands on TV’s Doomsday Clock to 11:59 p.m. As programmers increasingly look to draw consumers to their over-the-top streaming services by moving more live sports to these digital platforms—“strip-mining their linear networks of their best programming,” in the words of the MoffettNathanson report—cord-cutting is picking up steam. And as cord-cutting accelerates, you’ll start to see even more of the marquee stuff, including the NFL, shift to the new platforms. This is what people mean when they say “robbing Peter to pay Paul,” only in this case, Peter’s also getting clobbered over the head with a tire iron for his troubles.

The own-goals will continue to skitter into the net as the media conglomerates scramble to bring their streaming losses under control. These losses are not inconsiderable. In December, Comcast president Mike Cavanagh told investors that the company had sustained a $2.8 billion hit from its Peacock unit in 2023, before adding that this should mark the absolute nadir for the service. Meanwhile, Paramount+ has burned through a small fortune, and Disney+ has racked up $11.4 billion in losses since it was unveiled in 2019.

Nothing a few NFL games can’t fix, right?

The analysts believe otherwise. “There was a time when we were confident—OK, at least somewhat confident—that there was a floor for cord-cutting,” the writers of the MoffettNathanson report concluded. “Yes, entertainment programming was always destined to be non-linear. But live sports and real-time news would be the bulwark. … What gradually eroded that confidence wasn’t a change in consumers; it was the willingness of management teams to ‘cheat,’ [by] moving sports …to alternative platforms at a fraction of the wholesale price charged to distributors.

“All that shows in the latest numbers. There’s not much here to be happy about.”