What Display Daily thinks: The first quarter of 2024 highlighted significant challenges and shifts within the television industry. YouTube TV’s estimated subscriber losses reflect broader industry trends, including the impact of seasonality and the ongoing decline of traditional pay TV. As advertisers and viewers continue to migrate to streaming platforms, the landscape of television consumption is poised for further transformation.
What does that mean to the TV hardware makers? That’s where it gets a lot harder. In some ways, it confirms what we have been saying all along, at least here on these pages, that next generation TV buyers are not going to consume TV programming like previous generations. That could mean everything from switching back and forth between multiple devices to not really watching large screens at all. Software drives the market and YouTube won’t be down for long, and it certainly doesn’t need a big TV screen to make its fortune.
It may be a generation or two before we actually start to see TVs in the home disappear, but we could be at the beginning of the end of the traditional communal TV experience. We are definitely in the middle of a sea change in consumer behaviors towards the consumption of content, and they are probably as confused as any of us are about what services to pay for, how to find something to watch, and what the hell are we doing with all that time wasted scrolling through endless categories of films and TV series that we never watch because we have no time left after scrolling endlessly through categories of films and TV series.
You think your pricing models and color gamuts are going to matter much in this market? TV brands have to change, and they are trying, you know, with all the operating systems, ad platforms, and discovery pages, but is that going to be enough? Are TV makers able to understand the shifting patterns of consumer behavior in TV watching? Are TV makers even able to adapt their products to differentiate themselves in the market for next generation TV buyers? I doubt it. There’s probably blank stares all around on this one, and in the meantime, we’ll just watch capacity and utilization rates of certain panels take a hit and wonder where are in the next cycle.
Seems like a doom cycle is TVs doesn’t just apply to the pay TV ecosystem. So, who does care if changing view habits change TV purchasing patterns?
YouTube and Pay TV and TV’s Doom Cycle
In recent years, the television industry has experienced significant transformations, with streaming services increasingly gaining ground over traditional pay TV and cable TV. The first quarter of 2024 highlighted these shifts vividly, revealing critical trends and challenges for YouTube TV and the broader pay TV ecosystem.
YouTube TV is estimated to have lost approximately 150,000 subscribers during the first quarter of 2024. This decline is particularly interesting for two reasons:
- Rarity of Subscriber Updates: YouTube TV seldom releases subscriber numbers, making any update noteworthy.
- Historical Growth: Historically, YouTube TV has rarely experienced subscriber losses, making this quarter an anomaly.
Earlier in 2024, Google confirmed that YouTube TV had over eight million subscribers, positioning it as the most popular live TV streaming service, significantly ahead of Hulu Live TV, which has around 4.5 million subscribers. The loss of 150,000 subscribers, if accurate, suggests a possible dip below the eight-million mark, though this remains unconfirmed.
Several factors might have contributed to the subscriber losses for YouTube TV:
- Seasonality and NFL Impact: The end of the NFL season likely prompted many subscribers, who had signed up specifically for NFL Sunday Ticket, to cancel their subscriptions. This trend underscores the growing seasonality in sports-driven linear virtual multichannel video programming distributors (vMVPDs).
- Industry Trends: The broader pay TV industry also saw significant subscriber losses, with an estimated two million subscribers lost in the first quarter of 2024. This trend indicates that YouTube TV is not immune to the challenges facing the wider industry.
The first quarter of 2024 was marked as the worst ever for US pay TV subscriber losses, with the subscription linear video ecosystem shrinking by an all-time high of 12.3%. Craig Moffett, an equity analyst at MoffettNathanson, highlighted that every major vMVPD service, including YouTube TV, experienced subscriber declines during this period.
Moffett introduced the concept of the “Doom Cycle,” where rising costs for sports programming drive entertainment-focused users out of the pay TV ecosystem. As sports programmers increase content prices to offset lost revenue, more subscribers cut the cord, perpetuating a vicious cycle. Additionally, entertainment companies facing declining distribution in the pay TV ecosystem are licensing more marquee content to direct-to-consumer streaming services, further driving subscribers away from traditional pay TV.
vMVPD services provide a bundle of live TV channels streamed over the internet, similar to traditional cable or satellite TV providers, but without the need for a physical connection like a cable box or satellite dish. Examples of vMVPDs include YouTube TV, Hulu Live TV, Sling TV, and FuboTV. They offer an alternative to traditional pay TV services by allowing consumers to access live television and on-demand content through their internet connection, often at a lower cost and with greater flexibility.
Another significant shift is occurring in the advertising landscape. As streaming services continue to grow, advertisers are increasingly moving their budgets from linear TV to streaming platforms. This migration is driven by the superior targeting capabilities of ad-supported subscription video on demand (SVOD) and advertising-based video on demand (AVOD) services. As a result, more content and viewer attention are shifting away from pay TV to streaming platforms.
Moffett estimates that virtual MVPDs currently control around 30% of US pay TV subscribers and predicts they will hold a market share of about 50% by 2028. Despite the recent subscriber losses, YouTube TV and other streaming services are expected to continue their growth trajectory as they capture a larger share of the pay TV market.
