Please ensure Javascript is enabled for purposes of website accessibility

AT&T Reveals Cord-Cutting Is Kicking Higher; Fox Gets Kicked by Its Soccer Deal

By Motley Fool Staff - Oct 19, 2017 at 1:53PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Video subscriber numbers are falling, and so is the value to Fox of its expensive deal to broadcast a World Cup that now the U.S. team won’t be attending.

In this segment of the Motley Fool Money podcast, host Chris Hill, Million Dollar Portfolio's Jason Moser, Supernova and Rule Breakers' David Kretzmann, and Motley Fool Hidden Gems' Andy Cross consider the news that AT&T (T 1.67%) lost 90,000 net video subscribers last quarter -- and even that number was inflated by acquisitions. Meanwhile, Fox (FOX) (FOXA) is probably wincing over how much it paid for U.S. rights to broadcast the 2018 World Cup Soccer tournament, which the U.S. men's team will be watching from their couch.

A full transcript follows the video.

This video was recorded on Oct. 13, 2017.

Chris Hill: This week, AT&T revealed the company lost 90,000 video subscribers in the third quarter. AT&T owns DirecTV. Andy, just one more data point for cord cutting.

Andy Cross: Yeah, another one. Comcast will probably report the same when it reports, probably lose about 150,000. And the trend is not good. This is a little bit worse than what AT&T did last quarter when they had a drop of about 200,000. If you add in what they have with DirecTV now, the drop would have been closer to 390,000, not just the 90,000. So, this is a shift of consumer tastes. But, also, the big concern for these companies is, the profitability for those bundled subscribers is so high. It's good revenue for those companies. As we all start to shift to more over the top opportunities and offerings from these companies, the profits start to eat into the parent companies, like AT&T and Comcast. It's one reason why AT&T is going after Time Warner with that $85 billion monster deal to help distribute some of their revenues around. So, yeah, the trend is not good. I don't think any of us think that trend is over. That trend is going to continue for the foreseeable future.

Hill: And for all we talk about ESPN, we should probably point out, not a great week for Fox Sports, which paid $425 million for the broadcast rights to the Men's World Cup in 2018 and 2022, and here in the United States, I don't know if you noticed this, Andy, the men's team won't be attending.

Cross: Yeah. It's not good for Fox Sports. It's not good for men's soccer. It's not really good here for soccer in the United States, too, which is, obviously, so many of our kids play and enjoy. But, this is the risk when you start to do programming and content still is so key, although, distribution, as we see with Netflix, continues to get more important across the board. Again, a Time Warner-AT&T deal. But, the content costs that these companies are laying out, and then you have the risk factor on the end, there's some big tail risks that investors have to concern themselves with when they think about investing in these content companies.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$21.31 (1.67%) $0.35
Twenty-First Century Fox, Inc. Stock Quote
Twenty-First Century Fox, Inc.
FOX
Twenty-First Century Fox, Inc. Stock Quote
Twenty-First Century Fox, Inc.
FOXA

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.