Although the pay-TV industry is still losing subscribers, cord-cutting appears to be only partly to blame because it has flattened out.

Alan Breznick, Cable/Video Practice Leader, Light Reading

August 8, 2014

3 Min Read
Cord-Cutting Slows But Danger Still Real – Moffett

Despite losing more video subscribers in the second quarter, US pay-TV providers can at least take solace in the fact that cord-cutting isn't getting any worse. That doesn't mean there isn't still danger ahead.That's according to Craig Moffett, a principal and senior analyst for MoffettNathanson. In his latest analysis of US pay-TV industry trends issued Thursday, Moffett found that cord-cutting slowed to "a crawl" in the second quarter. After factoring in such variables as the low rate of new household formation, he calculated that cord-cutting fell to an annualized rate of 400,000 customers in the spring quarter, well below the peak rates seen two years ago."Cord cutting trends in Q2 remained surprisingly benign," Moffett wrote in his report. "Over the past year, the number of pay-TV subscriptions in the US has barely budged. That may not sound like a reason for celebration, but it is a small but discernible improvement from recent trends when the number of pay-TV subscribers was actually shrinking (albeit slowly)."Moffett noted that pay-TV industry revenue and ARPU growth trends remain healthy, with revenue up 3.7% and ARPU up 3.8%, both on an annualized basis. He also noted that the industry is now "growing revenue more than twice as fast as the wireless industry," after adjusting for accounting distortions in the mobile business. "Certainly, to paraphrase Mark Twain, reports of the demise of pay TV have been greatly exaggerated," he wrote.Yet Moffett said he's becoming "more nervous" about the pay-TV industry's prospects as the "affordability stresses continue to build and the obstacles to cord cutting (particularly content availability, but also technology) … continue to fall away." In fact, he warns that "the risks to the system are now higher … even though the current evidence suggests that trends remain benign."Moffett also pointed out that while the pay-TV industry continued to bleed customers during the spring, it fared better than usual in the traditionally weak quarter. Overall, he said, pay-TV providers lost 305,000 video subs during the three-month period, as opposed to 387,000 a year ago and 378,000 two years ago. That leaves the 100-million-home industry just about flat with where it was a year ago.For more of Light Reading's coverage of pay-TV trends, visit our video services content channel.As might be expected, the cable industry continued to bear the brunt of the video subscriber losses in the quarter. Moffett figures that cable operators lost a collective 517,000 TV customers during the spring, as they were battered by satellite TV and telco competition. But, in a promising sign for cable, the 2.7% annualized loss rate was actually the industry's best second-quarter performance in six years. (See Cable Cuts Video Losses in Q1.)The two satellite TV players, DirecTV Group Inc. (NYSE: DTV) and Dish Network LLC (Nasdaq: DISH), lost a combined 78,000 subscribers in the second quarter, an improvement over the 162,000 subs they lost a year ago. Despite the loss, the industry still posted a year-on-year sub gain of 0.7%, up from 0.2% a year ago.AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) continued to make significant inroads in the pay-TV market, adding a combined 290,000 video subs in Q2 to boost their customer total 12.3% from a year ago. But the growth rate is clearly slowing down for the two telcos, which picked up 373,000 video subs in the year-earlier period.— Alan Breznick, Cable/Video Practice Leader, Light Reading

About the Author(s)

Alan Breznick

Cable/Video Practice Leader, Light Reading

Alan Breznick is a business editor and research analyst who has tracked the cable, broadband and video markets like an over-bred bloodhound for more than 20 years.

As a senior analyst at Light Reading's research arm, Heavy Reading, for six years, Alan authored numerous reports, columns, white papers and case studies, moderated dozens of webinars, and organized and hosted more than 15 -- count 'em --regional conferences on cable, broadband and IPTV technology topics. And all this while maintaining a summer job as an ostrich wrangler.

Before that, he was the founding editor of Light Reading Cable, transforming a monthly newsletter into a daily website. Prior to joining Light Reading, Alan was a broadband analyst for Kinetic Strategies and a contributing analyst for One Touch Intelligence.

He is based in the Toronto area, though is New York born and bred. Just ask, and he will take you on a power-walking tour of Manhattan, pointing out the tourist hotspots and the places that make up his personal timeline: The bench where he smoked his first pipe; the alley where he won his first fist fight. That kind of thing.

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