Pay-TV Providers Bleed Subs

Despite stronger video subscriber gains by the two leading telco TV players, the US pay-TV sector suffered through an even worse spring than usual, according to the latest analysis by Leichtman Research Group (LRG) Inc.

In its new quarterly roundup issued Monday, LRG reported that the 13 largest US cable, satellite, and telco TV providers collectively lost 344,000 video subscribers in the second quarter. That’s more than the same 13 providers, who represent about 94 percent of the overall pay-TV market, lost in the two preceding springs, when losses were a combined 325,000 video customers each time.

The second quarter is notoriously weak for the pay-TV sector because of seasonal moves by college students and snowbirds. But the sector is not adding nearly as many new subscribers as it once did during the other three quarters, leading to forecasts that the industry will suffer its first annual loss ever this year.

The nine biggest US cable operators led the way down in the second quarter, collectively losing a whopping 555,000 video subscribers. That’s a bit more than they lost in all of 2012, when they shed a combined 540,000 customers. Unlike last year, when at least one large MSO, Cablevision Systems, avoided a loss, all nine MSOs registered declines this spring.

At the same time, the two major US satellite TV providers suffered a much bigger drop this time around. DirecTV and Dish Network teamed up to lose 162,000 video subscribers during the spring, much worse than last year’s loss of 62,000 subscribers. In fact, LRG noted that it was the worst quarterly loss for the satellite TV industry since the research firm began tracking it more than a decade ago.

In contrast, the top two US telcos -- AT&T Inc. and Verizon Communications -- netted 373,000 video subscribers in the second quarter. That’s notably up from 275,000 new subscribers a year ago.

As a result, cable’s market dominance continues to slip. The nine top MSOs ended June 30 with 50.5 million subscribers, or nearly 54 percent of the market’s 94.6 million subscribers. The satellite TV providers finished the quarter with 34 million subscribers, or nearly 36 percent of the market. The two telcos closed the quarter with 10 million subscribers, or close to 11 percent of the total market.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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mendyk 8/22/2013 | 2:14:37 PM
Re: How many is not enough? Actually, in a WSJ interview a couple of weeks ago, Jimmy Dolan said something along the lines of "don't call us a cable company."
albreznick 8/22/2013 | 12:35:04 PM
Re: How many is not enough? I agree with the weight and muscle mass part. When will the name cable die? Good question. It'll probably take a generation for that to happen, even if the name doesn't mean that much anymore. We're so used to using the term. 
mendyk 8/20/2013 | 4:16:14 PM
Re: How many is not enough? At what point do we stop referring to "cable" companies? Most now offer a full range of communications services. Pay TV won't die. It will just lose some weight and muscle mass.
albreznick 8/20/2013 | 4:01:47 PM
Re: How many is not enough? That's a good point. I don't think pay TV will die either. But it may not dominate the market like it does now, just like radio hasn't for a long time. In any case, I think broadband is the big business in cableland now because everyone needs that and cable dominates that market as well. Will be interesting to see when we hit the saturation point there.   
theschnack 8/20/2013 | 1:04:16 PM
#s, categories Expect to see numbers combined as "multi-service connections", with the focus on providing the services the subscribers value over the broadband connection (whether 'tv' video or not).
mendyk 8/20/2013 | 12:14:16 PM
Re: How many is not enough? The problem posed by "young adults" (oh, those kids) happens every generation (maybe even a couple of times per generation). Let's count all the things that have been pronounced dead in the past 20 or so years: Network TV. Books. The music "industry." Newspapers. Anything printed. Baseball. The public network. Radio has been dead for at least 50 years now. The numerical fact with pay TV is that the number of customers has probably peaked, and it may even decline by 10% or more in the next decade. If businesses can't deal with some shrinkage, then they should exit.
albreznick 8/20/2013 | 11:41:14 AM
Re: How many is not enough? Good question. No, the penetration percentages haven't really changed. The pay TV market appears to finally be saturated. 

As for cord cutting, of course it's real. But the even bigger issue for the cable guys is that there are so many young adults like Carol's son who see no need for a pay TV subscription. There's a whole generation coming of age who may never subscribe to cable TV or satellite TV or telco TV. And why should they?

Cable ops are trying to do several things in response. First, they're trying to lock in subs to double-play, triple-play and even quadruple-play bundles, so it's hard for them to cut the video cord. They're also pursuing the heavy TV watchers who spend just as heavily and letting the light watchers go away. And they're focusing more than ever on their broadband products, which is where their future really lies. In fact, it's predicted that BB subs will soon overtake video subs for the industry, which will be a real sea change.     
mendyk 8/20/2013 | 10:52:43 AM
How many is not enough? There are about 116 million households in the US, which means about 80 percent of them subscribe to a paid video service. Has that percentage changed all that much in the past five years?
Carol Wilson 8/20/2013 | 10:15:42 AM
Re: What are the cable giants planning to do about this? There does seem to have been an unintentional public conspiracy to pretend cord-cutting wasn't real, even as every one of us saw - at least anecdotally - a larger group of individuals moving away from cable TV. 

On the anecdote front, one younger person I know -- okay it's one of my kids -- recently moved into a condo where basic cable is free and has yet to bother to plug the coax into his TV set. He's not a sports fan, doesn't watch the news, and views everything else online. He would use a DVR and on-demand video, but those are an "up charge" and therefore not worth the effort. 

Cable may have to do more than cut prices to lure back viewers like him. 
KBode 8/20/2013 | 8:50:45 AM
Re: What are the cable giants planning to do about this? Some analysts have equally been in denial. This has been fun to watch. Especially as the housing market strengthens and the related TV subscriber surge they expected doesn't materialize. 

You had Nielsen, a cord cutting denier, that simply changed their metric language (from "cord cutters" to "Zero TV households") when it became obvious that a cord cutting trend was real. You have Craig Moffett, also a huge cord cutting denier, recently proclaiming that cord cutting was not longer a myth, after a year earlier mocking these users and pretending they weren't real.

Leichtman, also somebody who denied this was a real trend, addresses the disconnect in his previous prognostications by this week failing to even mention cord cutting whatsoever.

And yeah I agree, price cutting would probably help them, but they'll refuse to do so until Internet video really starts eroding revenues, by which time the game will be afoot. Legacy operators aren't very good at getting out in front of trends. They like to deny, deny, deny...usually until it's too late.
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