While MVPDs have historically kept data about their subscriber take rates for different video packages close to the vest, MoffettNathanson analysts uncovered real world-data in an FCC filling that reveals broad differences in the mix of “fat” and “skinny” bundle uptake between distributors.
Charter Communications and Altice USA lead the pack for premium channel package signups, but which cable operator stands to fare better from their respective mix remains unclear. Still, the firm’s Tuesday report sheds light on some previously guarded data.
The filing was by beIN Sports and filed during a carriage dispute with Comcast. The figures in the filing appear to be from second quarter 2017 data, except for Comcast, which seems to be in line with Q1 results of 2018, according to the firm. The data also does not appear to be as-reported video subscribers by each MVPD itself, but rather a subset of all video customers.
With quarterly earnings around the corner, many focus on video subscriber loss figures due to cord-cutting. However, MoffettNathanson analysts note that the less discussed, but just as important, factor of average revenue per user is also evolving as the proliferation of skinny bundles shifts an important driver of ARPU from merely pricing to distributors’ mix of video packaging uptake.
“Some customers take skinny bundles, some fat; the spread in price from top to bottom can be 3x or more,” analyst Craig Moffett wrote in the Tuesday report.
When it comes to premium bundles, Altice and somewhat surprisingly Charter have the highest take rate, according to Moffett, with each having a full 43 percent of subscribers taking their premium tier packages that include at least HBO, along with additional premium channels.
AT&T’s DirecTV premier package is next, but at a notably lower 28 percent.
“That DirecTV isn’t higher is worth nothing; historically, its customer base was by far the industry’s most affluent, and AT&T’s linear video ARPU (predominantly comprised of satellite subscribers) is still, by far, the industry’s highest,” Moffett wrote.
Comcast’s premium bundle uptake comes in at 26 percent, followed by Verizon and AT&T’s U-Verse, at 20 percent and 19 percent respectively. Cox, meanwhile, came in at 15 percent, with Dish’s premium video package uptake at 5 percent, and Mediacom at zero.
Although some argue premium package subscribers are potentially the least price sensitive, having a greater portion of these subscribers is not a clear cut win, Moffett noted; subscribers with the most expensive packages are also those that might have the greatest incentive to cut the cord or opt for a skinnier linear bundle.
Charter, for its part, has had success with its more affordable premium packaging that is less expensive than similar offerings from Comcast, Dish or AT&T.
AT&T’s premium video offerings are the most expensive at $180 per month following a $110 promotional introductory rate.
Moffett pointed out that AT&T’s Entertainment Group EBITDA declined “an astonishing 19% last quarter.” He indicated AT&T’s Entertainment EBITDA might have further drops in its future, “or many further subscribers to churn, once they stop off of far more attractive promotional rates.”
The Flip Side
When it comes to limited basic skinny bundles, including broadcast networks, PEG channels like C-SPAN and a small lineup of cable networks, Mediacom has the highest uptake with 49 percent of its subscriber base taking their Local Plus package. Mediacom notably only offers two packages, with the remaining 51 percent taking its Family TV offering, which MoffettNathanson categorizes as a “broad middle” channel package.
Charter, meanwhile, leads in premium package uptake rates and comes in near the top for its base package, with the second highest take rate of its skinny bundle at 28 percent. The high mix of both premium and basic packages could owe to differences in strategy between legacy Charter and acquired Time Warner Cable footprints, the analysts noted.
Cox’s limited basic channel take rate comes in at 22 percent, followed by Verizon and AT&T U-Verse, at 16 percent and 13 percent, respectively. Comcast (10 percent) and Altice’s Optimum (6 percent) bring up the rear.
This new mix of packages for pay TV bundles is relatively new, Moffett noted.
“The emergence of internet-delivered skinny bundles has forced open the door to linear skinny bundles as well. Some operators have dropped whole suites of networks as when Cable One dropped Viacom,” Moffett wrote.
As distributors give consumers more choices and if they successfully create more tailored bundles, they will likely retain more subscribers, but Moffett forecasts “almost certain” sacrifices to ARPU.
Still, the firm warned against drawing any concrete conclusions from the report.
“It can be argued that those distributors with the most exposure to ‘fat’ bundles are either better insulated….or are more at risk. Ditto those with lower priced bundles,” Moffett wrote.
Editor’s note – The report described in this article was later amended to include the following commentary:
[“The programming mix data represented in this report is drawn from filings by beIN in an ongoing enforcement proceeding at the FCC. Charter Communications is not a party to the dispute, and has not supplied beIN with this subscriber penetration data. Charter has indicated to us that beIN’s data regarding Charter is incorrect. While Charter hasn’t publicly disclosed their share of limited basic, expanded basic, and premium video subscribers in their base, they have indicated that the actual number of limited basic customers is significantly lower than what is published in the beIn filing referenced in our report.”]