That's because operators, particularly cable MSOs, are poised to see some decent incremental subscriber growth in the second half of this year, with a more significant ramp expected in 2009, Sanford analysts said during a conference call today.
Most operators are on the hook to conform with new Federal Communications Commission (FCC) rules that require MSOs to deliver "must carry" broadcast stations in analog and digital format for at least three years following the transition. (See FCC OKs Dual TV Carriage Rules.) Smaller cable operators can request a "hardship" waiver and are pushing for a blanket exemption. (See Small Cable Lobby Asks for DTV Exemption and McSlarrow Backs the Little Guys .)
Sanford estimates that about 14 million U.S. TV homes continue to rely on over-the-air video, and predicts that roughly 1.4 million of those will sign up for a pay TV service as a result of the transition.
So, 2009 should be a good year for the cable industry, said Sanford analyst Craig Moffett.
Table 1: Incremental Net Additions by Pay TV Providers as Result of DTV Transition (000s)
|Time Warner Cable||76.1||136.2|
|Other Pay TV Providers||123.0||218.1|
|Source: Sanford C. Bernstein & Co.|
But operators shouldn't get too excited. The transition will help MSOs goose their base of basic subscribers, but the bounce they see won't serve as extraordinarily profitable growth or present a long-term solution that offsets the present impact of the U.S. housing crisis. The impact on the total pay TV universe will be minimal, according to the firm's estimates.
And that expected growth comes with some caveats. For example, the demographics for over-the-air (OTA) TV households "are not terribly attractive" from an income point of view, Moffett said. Data shows that roughly 25.3 percent of OTA TV homes have incomes of less than $30,000. That compares to 9 percent with household incomes of $75,000 or more.
It's therefore quite possible that those homes, if they choose to sign up for a cable service, will opt for the operator's low-end basic tier.
But that might also serve as a silver lining and turn things in cable's favor over its satellite and telco TV competitors as OTA TV homes mull their options.
Moffet noted that cable's phone services are $12 less than incumbent telcos', on average. With cable's broadcast basic "lifeline" tier selling for about $12 per month, the numbers would essentially wash and perhaps give price-sensitive OTA households an incentive to sign up for at least a two-service bundle from the cable operator. It then follows that cable appears poised to pick up a disproportionate share of those customers, but Sanford did not apply that assumption to its forecast.
— Jeff Baumgartner, Site Editor, Cable Digital News