Pay-TV Conversion Rate Strong, but Uncertain for How Long, MoffettNathanson Says

The rate of pay-TV subscriber declines stabilized Q1, but more important is the conversion rate at which virtual MVPD subscriptions offset linear TV declines, MoffettNathanson analyst Craig Moffett wrote investors Thursday. High conversion rates benefit media companies since they get higher per-subscriber affiliate fees from virtual MVPDs and the future looks brighter when more cord cutters are still paying for a streaming video bundle -- even a skinny one -- than being lost to the pay-TV universe altogether, MoffettNathanson said. Since Q1 2016, the conversion has averaged 83 percent, it estimated, saying the figure has varied notably from quarter to quarter. It estimated the Q1 conversion rate was 69 percent, while the Q4 2017 conversion rate was 125 percent. The rate could decline since many counted as virtual MVPD subscribers are still in their free promotional periods. It said password sharing points to likely declines in conversion rates. For the quarter, traditional pay-TV subscriptions declined at 3.4 percent year over year for the second straight quarter. Including virtual MVPDs, that subscriber drop was 0.5 percent. The cumulative number of cord-cutter and cord-never households hit 14.14 million in Q4.