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In the third quarter, the trend of "line-line" services in the U.S. linear television sector reached a new peak. According to Deutsche Bank analyst Matthew Niknam, virtual pay-TV services like DirecTV Now and Sling added approximately 900,000 users during the same period, while traditional linear TV services lost over 1 million video subscribers. This shift highlights a growing preference for on-demand, flexible streaming options over conventional cable models.
The top seven pay-TV providers reported earnings data for the third quarter, with five of them disclosing their user trends. The results showed that nearly 632,000 customers canceled their linear TV subscriptions. Analysts attribute this decline to the rising popularity of OTT (over-the-top) services, which offer more flexibility and lower costs. Additionally, the impact of the hurricane season may have further disrupted satellite TV services, particularly for Dish Network, which is expected to face significant subscriber losses.
AT&T's DirecTV and U-verse platforms together lost 385,000 subscribers in the third quarter, accounting for 38% of total pay-TV cancellations. Meanwhile, Dish Network and Comcast each saw around 125,000 and 125,000 video users leave, respectively, contributing to a 40% share of overall losses. This means Dish likely lost at least 300,000 linear TV subscribers during the quarter.
Despite these losses, AT&T’s virtual MVPD service, DirecTV Now, gained 296,000 new subscribers, making up 33% of all new sign-ups in the virtual MVPD space. Other major players in this market include Sling TV, Hulu Live, YouTube TV, and Sony PlayStation Vue. These platforms are reshaping how consumers access live TV content, offering a mix of live channels and on-demand programming without the need for traditional cable infrastructure.
Analyst Niknam believes the virtual MVPD market will continue to grow, but not at a pace that can offset the declining linear TV audience. He predicts that after 2018, linear TV subscribers will decrease by about 1 million per quarter, and the growth in OTT users won't be enough to compensate for this loss.
Moreover, analysts note that linear TV services generate three times the profit of OTT services. This disparity could have a significant financial impact on companies like AT&T as they transition from traditional models to more modern, digital-first strategies. The shift from linear to OTT is not just a technological change—it's a major challenge for the company’s long-term profitability and business strategy.