Verizon reported that Q2 ’15 FiOS video subscriber additions declined to just 26K in Q2 ’15, down from 100K additions in Q2 ’14 and 140K additions in Q2 ’13. In the earnings call, Verizon CFO Fran Shammo pinned the blame for the declines on “triple play offer changes at a time of increased competitive intensity” before saying that its new Custom TV packages are now accounting for a third of all new video subscribers.

Verizon is the first big pay-TV operator to share its results and a key question is whether its weak quarter is an early indicator of an accelerating industry slowdown. Last week, in discussing Netflix’s breakout Q2 ’15 results in the U.S. (in which it added 900K subscribers vs. a range of 530K-630K additions in each of the prior second quarters), I asserted that Netflix’s gain could finally be coming at pay-TV’s expense, particularly among younger cord-nevers.

I know that’s a somewhat contrarian point of view since Netflix itself has always positioned itself as an augment to pay-TV, not a substitute. And recent research from TDG also shows a relatively high 84% of Netflix subscribers still taking pay-TV (though that’s down 3 percentage points in the past 3 years). I’m guessing however, that the breakout for younger Netflix subscribers would show a different picture.

To me, the pattern that’s likely emerging is that younger millennials, who in the past would have been highly likely to subscribe to pay-TV upon setting up their first rental apartments/houses (often splitting the cost with roommates), are increasingly foregoing pay-TV just as they’ve been doing with landline phones for years. Rather, they are drawn to Netflix  - either by starting their own inexpensive accounts or by just continuing to share their parents’. Pay-TV executives recognize this threat, which why we’ve seen the launch of Sling TV, HBO Now, Showtime online, Verizon’s Custom TV, Stream from Comcast and others.

As the Q2 video subscriber numbers come in from pay-TV operators over the next few weeks, I believe we’ll see increasing softness in video subscribers throughout the industry. Note, I don’t believe this is being driven by a jump in cord-cutting. Rather, it’s about the young millennials who have dramatically shifted their viewing and their spending. Q2 has always been a slow quarter for pay-TV, but this one could be especially soft. If it is, the blame should be placed squarely on Netflix and other OTT providers, which are increasingly a bona fide alternative to expensive pay-TV subscriptions.