Cord-Cutting Rears Its Ugly Head as AT&T Discloses Falling Video Subs

"It is reasonable to expect a weak quarter for the whole pay TV industry," says one Wall Street analyst.

AT&T, the parent company of DirecTV, will report losing 90,000 video customers when it discloses quarterly financial results this month due in part to cord-cutting, the telecommunications company said Wednesday in a regulatory filing.

AT&T, which is still awaiting final approval on its $85 billion merger with Time Warner, said it will lose 390,000 traditional video subscribers but gain 300,000 on its over-the-top digital service.

"The video net losses were driven by heightened competition in traditional pay TV markets and OTT services, hurricanes and our stricter credit standards," the company said in its filing.

"It should be clear that DirecTV, like all of its cable peers, is suffering from the ravages of cord-cutting," MoffettNathanson analyst Craig Moffett said Wednesday in a research note after Wall Street's closing bell.

The revelation comes after Comcast also acknowledged weak video subscribers.

"DirecTV and Comcast are seeing and responding to the same secular pressures," wrote Moffett. "The issue is in the acceleration in cord-cutting, and the prevalence of OTT, not each other. It is reasonable to expect a weak quarter for the whole pay TV industry."

It might be safe to assume, however, that Wall Street has already factored much of the weakness into stock prices, as the industry has not participated much in the market's historic rise. Through the first three quarters of 2017, the Dow Jones Industrial Average rose 13 percent but 32 of the 50 stocks tracked by The Hollywood Reporter did not match that gain.

The research firm eMarketer predicts that 22 million adults in the U.S. will have cut the cord on their cable and satellite TV services by the end of 2017, while 16.7 million had already done so by the end of last year.