John Stankey, the new CEO of AT&T (NYSE: T), said he wouldn't be surprised by an increase in cord-cutting in the second half of the year. In January, Comcast's (NASDAQ: CMCSA) leadership said it expects to see an increase in cable TV subscriber losses this year, and that was before the coronavirus pandemic really took hold.
While consumers are spending more and more time sitting on their couches with the television on, cord-cutting is still a major threat to the pay-TV industry. In a recent BII consumer survey, 5% of Americans said they're planning on cancelling their pay-TV service because of the coronavirus pandemic. That would be about 1 million more subscribers lost for both AT&T and Comcast.
Some subscriber losses may be temporary, but it looks like most of them will leave cable behind for good.
Who's only saying goodbye for now?
There are two groups that might only be temporary cord-cutters: businesses and sports fans.
Bars, restaurants, and hotels don't have much demand for cable television right now, so it shouldn't be a surprise for many to leave their TV subscription behind in April. Business customers represent a sizable portion of AT&T and Comcast's subscriber bases not included in the BII survey. Comcast had nearly 1 million business subscribers as of the end of 2019.
The companies could lose hundreds of thousands of subscribers very quickly, but the good news is they'll return when businesses start opening up again. Sports bars aren't much fun without sports on the TV, and hotels without cable are practically unheard of.
Sports fans are also cancelling their home subscriptions with the major sports leagues on hold indefinitely. Commissioners started cancelling games in mid-March, so a wave of cancellations could start showing up as soon as April.
But just 11% of consumers planning to cut the cord were doing so because of a lack of sports, according to the BII survey. That means, very few consumer subscriptions are going to be short-term cord-cutters.
The bigger reasons for cutting the cord
Two big reasons top the charts for why consumers are considering cutting the cord during the coronavirus pandemic: Cutting back on spending and replacing it with new streaming services. The two reasons combined account for 80% of consumers planning to cut the cord.
Many consumers have been forced to tighten their purse strings amid the pandemic due to unforeseen job loss. Over 26 million Americans filed for unemployment insurance since the end of March.
While it might seem like those consumers will come back to cable when they return to work or the general economic environment improves, it seems far less likely than those considering cancelling due to a lack of sports. The former group of consumers are more likely to become habituated to living without pay-TV than big sports fans, and that could mean spending on other entertainment outlets besides TV.
For those consumers leaving the cable bundle for streaming, the impact of coronavirus may have only cemented a decision they were planning to make already. Netflix (NASDAQ: NFLX) saw a record number of signups in the first quarter, but management warned that it likely pulled forward a lot of subscribers that would've signed up later in the year anyway. Likewise, COVID may merely be pulling forward cord-cutters.
And with more and more streaming options entering the market in the first half of 2020, it's an opportune time for consumers to explore the options available as they contemplate cutting the cord.
Coronavirus will cause a lot of people to ditch cable TV, and it looks like most of them will be done for good. The winners are those that can pivot to streaming, which is something AT&T, Comcast, and other media companies are investing a lot of time and money in. Not all of them will succeed, however, and it's not clear they can generate enough revenue and profits to offset the losses from cord-cutting.
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