After stabilized losses of around 3.5% the last few quarters, pay TV operators will report resurgent growth in video losses for Q3, Cowen predicts

After four quarters of stabilized losses, in which aggregate year-over-year declines held steady at around 3.5%, pay TV operators are expected to report a “slight uptick” in cord cutting for the third quarter, according to a report released today by equity research firm Cowen.

Led by analyst Gregory Williams, Cowen polls consumers each quarter ahead of earnings reports for its Cable and Broadband Survey.

“With the vMVPD landscape showing more visibility and predictability (no new large, aggressive entrants to speak of), we should expect video losses to remain in the 3.4-3.6% range,” the report said. But Cowen’s latest polling suggest attrition to the linear pay TV ecosystem is about to surge, at least a bit.

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As the chart below shows, the percentage of survey participants identifying themselves as cord cutters surged over the summer after holding flat through late 2017 and the early part of 2018.

Cowen chart 1

Cowen said price is continues to drive consumer decision-making on video, not so much satisfaction.

“As we’ve previously noted, the largest problem for traditional MVPD’s, in our view, is that many OTT providers have no economic mandate for stand-alone operating profit as we consider AT&T (bundled for lower churn), Sling (eventual pivot to wireless), YouTube (Google ad eyeballs), and Amazon (Prime subscriptions). Streaming is not about technology threat as much as it’s simply a pricing threat by ‘irrational’ players,” the report said.

Meanwhile, Cowen said that it’s not just younger demos driving the cord-cutting trend anymore.

“Specifically, the 30-44 age group shows a 41% take rate of OTT-only video, up from 32% in 2Q18 and 24% in 1Q18,” the report noted. “The 45-60 age group shows similar trends but to a lesser degree with a 22% take rate vs. 21% in 2Q18 and 12% in 1Q18.”

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