Video services

Q2 Video Scorecard: The Winningest Losers

The U.S. pay-TV industry took it on the chin in the second quarter as the cable operators, satellite TV guys and telcos combined lost 418,000 customers in a period that's always marred by so-called "seasonality" as students and snowbirds turn off services and flee for the summer.

The reactions to these results have been mixed. Some see it as more proof of cord-cutting, while the more optimistic, like Sanford C. Bernstein & Co. Inc. 's Craig Moffett, believe it could've been a lot worse, and that the pay-TV industry actually held its own, improving on the year-ago quarter's net loss of 440,000 video subs.

Among providers, cable of course got hit the hardest, losing 616,000 video subs in the quarter, but 93,000 fewer than the 709,000 lost in the year-ago quarter, according to Bernstein's analysis.

Save for Time Warner Cable Inc. (NYSE: TWC), other publicly held U.S. cable operators lost fewer video customers in the quarter than they did in the year-ago period. Overall, it was the fifth consecutive quarter of year-over-year improvement for the industry in the category. While that's a positive recent trend of sorts for cable, which is still bleeding customers each quarter, it's not yet something to really crow about.

The satellite guys pulled off a dubious first as both DirecTV Group Inc. (NYSE: DTV) and Dish Network LLC (Nasdaq: DISH) lost video subs in the same quarter for the first time ever. The silver lining was that Dish's 10,000 video sub losses were well better than the 100,000 losses expected by analysts, while DirecTV countered dismal U.S. results with record subscriber growth in Latin America. Together, the satellite TV guys still combined to shed 47,000 fewer subs than the year before.

AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) provided some balance by adding a combined 275,000 video subs, but it was a weak showing, considering they added 386,000 subs in the year-ago period. Here's a snapshot of how the numbers stacked up across providers:

Table 1: Pay-TV Net Adds
Company Q2 2012 Q2 2011 Q1 2012
Comcast -176,000 -238,000 -37,000
Time Warner Cable -169,000 -128,000 -90,000
Charter Communications -72,000 -83,000 -27,000
Cablevision Systems No change -23,000 +7,000
Other cable -199,000 -237,000 -53,000
DirecTV -52,000 +26,000 +81,000
Dish Network -10,000 -135,000 +104,000
Verizon Communications +120,000 +184,000 +180,000
AT&T +155,000 +202,000 +200,000
Other telco -15,000 -8,000 +10,000
Total -418,000 -440,000 +429,000
Source: Sanford C. Bernstein and the companies.

Cord-cutting trends
While pay-TV could have had much worse showing in the typically rough second quarter, the totals, when combined with other market trends, did fan the cord-cutting flames a bit. Moffett notes that when he factors in the current pay-TV growth rate with the rate of new household formation, it does suggest that "yes, there are homes that are cutting the cord."

But he says it's still unclear if that trend is being driven by online video options or, as he sees it, if it's mainly a function of consumer belt-tightening.

But count Dish Chairman Charlie Ergen among the cord-cutting believers. "I personally think it's happening," he said Wednesday on the company's earnings call.

— Jeff Baumgartner, Site Editor, Light Reading Cable

shygye75 12/5/2012 | 5:24:09 PM
re: Q2 Video Scorecard: The Winningest Losers

Jeff -- How has the total number of US video subscribers changed over the past three years? That would probably offer a clearer indication of cord-cutting as an uber trend.

Jeff Baumgartner 12/5/2012 | 5:24:08 PM
re: Q2 Video Scorecard: The Winningest Losers

According to Bernstein's analysis, most of the quarterly periods since 2009 have shown increases in overall sub growth, with  Q2 the exception in most cases (there were 272K video adds in Q2 2009). As for the cord-cutting trend, the evidence suggests that it's still relatively small and anecdotal, but I also agree with Teresa Mastrangelo at BroadbandTrends, who notes in her Q2 report that we'll have to see data for a more consecutive quarters before anyone can really say if the cord-cutting trend is accelerating. JB

shygye75 12/5/2012 | 5:24:07 PM
re: Q2 Video Scorecard: The Winningest Losers

Thanks, Teresa. We would expect video subs in the US to remain flat more or less, considering that this is an ultra-mature market and the overall number of households, while growing, is not growing all that much in % terms.

tmastrangelo0 12/5/2012 | 5:24:07 PM
re: Q2 Video Scorecard: The Winningest Losers

The total number of U.S. subscribers for Pay-TV has actually remained fairly flat, with some nominal growth over the last three years.  The last period there was strong growth was in 2008.  But from an overall view - cord cutting does not seem to be impacting the  numbers.

shygye75 12/5/2012 | 5:24:07 PM
re: Q2 Video Scorecard: The Winningest Losers

OK. Quarter-by-quarter comparisons are fine for financial analyst types, but they don't shed much light on longer-term trends. In this case, you need to see the entire forest to understand the trees.

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