AT&T (T 0.58%) counts 17.8 million pay-TV subscribers as of the end of the third quarter. That's more than 7 million fewer subscribers than just two years ago. While the company showed progress in stemming the losses, down just 627,000 last quarter, CEO John Stankey thinks there are a lot more losses coming. 

During the company's third-quarter earnings call, he opined cord-cutting won't really stop until we get to between 55 million and 60 million subscribers. There were about 87 million subscribers as of mid-2020.

Scissors about to cut a cable cord.

Image source: Getty Images.

AT&T has been a share loser

Stankey acknowledged the fact that AT&T's subscriber losses over the last couple years have been well above the industry average. It's now looking to keep declines in line with its existing market share, which means investors should look for AT&T to lose fewer subscribers than Comcast (CMCSA -0.25%) going forward.

Comcast counted nearly 20.4 million video subscribers as of the end of the second quarter. While its subscriber losses have ticked up this year, as management warned in January, they're still well below AT&T's losses.

But even if AT&T manages to lose subscribers in proportion to its existing share, there are some important considerations for AT&T investors in that number. The company's outsize subscriber losses have been driven by its DIRECTV satellite unit. 

AT&T stopped reporting satellite subscribers separate from other premium video subscribers last year after subscriber losses accelerated. Management noted subscriber additions for its new AT&T TV product offset losses for DIRECTV and U-Verse last quarter.

The rapid decline of DIRECTV is noteworthy because management is under pressure to divest the asset. And with the poor health of the subscriber base, it's not going to fetch anything close to what it paid for the satellite TV company.

So even if AT&T manages to keep its market share stable amid cord-cutting, it's trying to sell a business that's losing significant market share in an industry that's already declining.

Protecting the media business from cord-cutting

Stankey believes the vast majority of those 55 million to 60 million households that don't cut the cord will be sports fans. And we'll see a slimmer bundle of channels offered by distributors as a result. That means fewer subscribers to fewer networks.

WarnerMedia, AT&T's media business, is well positioned to have a prominent place in that bundle. It owns valuable sports rights with the NBA and MLB, and CNN is a leading 24-hour news network.

But Stankey says HBO Max is an important hedge against further cord-cutting. Stankey says HBO Max is a great opportunity to pick up cord-cutters and establish or maintain a relationship with them. Moreover, it's a relationship where it's distributing content that it owns, instead of other companies' cable networks.

Comcast is similarly trying to position Peacock to protect itself against cord-cutting. Like AT&T, Comcast also owns a big television media company, NBCUniversal. As consumers continue to cut the cord, Comcast needs to expand the distribution of NBCU's content beyond the cable bundle in order to maximize its value.

Investors should expect other major media companies to follow suit, but they can't all be winners. AT&T and Comcast have a slight advantage due to their broad customer relationships across connectivity services, but the continued decline in pay-TV subscribers will be a headwind for years to come. There's still a long way to go before we reach Stankey's long-term cord-cutting plateau.