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Q2 Video Scorecard: Cable, Satellite Get Creamed

Unless you're named Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T) or, to a much lesser degree, DirecTV Group Inc. (NYSE: DTV), your video subscriber base probably took a heavy shot to the chin in the second quarter.

The weak economy, significant "seasonality" brought on each year by students and retirees who turn off services for their summer moves, and some cord-cutting all hit the U.S. pay-TV sector particularly hard in the quarter.

Estimates on how many subs U.S. pay TV shed in the quarter vary, but they're all pretty ugly. An Associated Press tally pegged the losses at about 195,700. It was so bad that the U.S. satellite TV industry ended the quarter with a subscriber deficit (believed to be a first) as Dish Network LLC (Nasdaq: DISH) lost a bunch of subs and DirecTV Group Inc. (NYSE: DTV) barely kept its head above water in terms of U.S. sub additions.

Video sub numbers at AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) were relatively flat, and they probably should have done much better.

"I thought there was nothing especially good or bad about their quarter, considering how large the losses were on the cable side," Infonetics Research Inc. Directing Analyst, Video, Teresa Mastrangelo says.

The picture was dim indeed for U.S. cable operators, which lost a combined 702,000 video subs in the quarter, according to Infonetics. It wasn't the worst ever (the third quarter of 2010 was more dismal), but it wasn't something to be proud of.

Here's how some of the nation's top pay-TV service providers stacked up in the second quarter:

Table 1: US pay TV industry subscriber trends
Service provider Q2 2011 Q2 2010 Q2 2009
Comcast -238,000 -265,000 -214,000
Time Warner Cable -128,000 -111,000 -57,000
Charter Communications -80,000 -72,000 -72,000
Cablevision -23,000 +3,000 -9,000
DirecTV +26,000 +100,000 +224,000
Dish Network -135,000 -19,000 +26,000
Verizon (FiOS TV) +184,000 +172,000 +295,000
AT&T (U-verse TV) +202,000 +209,000 +248,000
Source: Sanford Bernstein and company reports.




What happened?
Analysts pinned the blame on a range of factors, but agreed that the bad economy was the underlying reason for the MSOs' tough quarter.

Mastrangelo says the results do demonstrate that there is clear competition for video services, and much less for broadband, where cable continues to enjoy sub increases each quarter.

While some losses were due to consumer belt-tightening, the overall losses in the pay-TV category will certainly fan the cord-cutting flames, since it's likely that a number of them opted to switch off their cable subscriptions and instead fulfill their video needs with broadband in conjunction with Roku Inc. boxes and other specialized video streaming devices.

"It's going to kick up the discussion" on cord-cutting, says Ian Olgeirson, senior analyst at SNL Kagan . The firm's most recent data shows that 4 percent of occupied homes -- about 4.5 million -- will fit into the "over-the-top substitution" category by year-end. While some of those are bona fide cord-cutters, the estimate also includes households that may not have been subscribing to a pay-TV service in the first place.

"But you can't discount the effects of the economy, unemployment… and sluggish housing formation," Olgierson adds.

"Economic justification is driving disconnects more than over-the-top," Mastrangelo agrees, but notes that OTT options are becoming increasingly appealing as they gain access to more and fresher content.

"Rising prices for pay TV, coupled with growing availability of lower-cost alternatives, add to a toxic mix at a time when disposable income isn't growing," Sanford C. Bernstein & Co. Inc. analyst Craig Moffett wrote in a recent note to investors.

Moffett believes satellite TV is the most vulnerable in a weak video market because players in that segment have less to fall back on. Cable, he adds, now generates roughly half of its subscription direct gross profit dollars from voice and data services.

— Jeff Baumgartner, Site Editor, Light Reading Cable



Jeff Baumgartner 12/5/2012 | 4:56:12 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

Happiness with the service itself plays a role too. But I'll be interested to see if next -gen video services, like the Xcalibur service Comcast demod at The Cable Show,  has any effect once it gets launched and gets six months on the market. JB


 

FbytF 12/5/2012 | 4:56:12 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

Is it the economy or is it just crappy service with a viable alternative?  I doubt its just coincidence that Comcast, legendary for crappy service and crappy employees is the biggest loser in this group, whilst AT&T and Verizon are growing their subscriber base.  Comcast charges beyond premium prices for 3rd world service.  I'm certain those living in areas served by AT&T and Verizon are just 1 help desk call to Comcast away from switching service providers.  Easier to just blame the economy and seasonal fluctuations.  Catch Comcasts new service promise, if they're late they'll credit you $20 on your bill.  BFD, try calling for service during an outage, if they have to dispatch, you'll have to wait 3-5 days for Comcast to send someone out.  The least they can do is be on time.  Most people won't wait that long so you have to go to their office to get a replacement box on your own and install it yourself.  Premium price, 3rd world service at its best. Please, please, AT&T, Verizon bring a viable alternative to my area.

FbytF 12/5/2012 | 4:56:11 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

Xcalibur make a difference? I  doubt it and here's why. 1 Comcast will charge yet another premium for this level of service.  Most users will be hard pressed to justify the additional cost on top of the already premium price and 2. Putting lipstick on a pig ........ If Comcast can't deliver quality service today, adding enhaced services and capabilities isn't going to make their service any better. Added complexity will only add to the terrible service they provide when you call to report a problem.  You have to master the basics first and they haven't don that yet.  Can you imagine calling Comcast to report a problem getting MOD on your Smart phone.  I can just imagine them blaming the problem on your wireless provider....... They implemented a new channel guide recently and I suppose they were trying to imitate the FioS channel guide, not even close. Maybe the next version in Xcalibur will be better, heck it would have to be as bad as the current one is, anything would be better.

Jeff Baumgartner 12/5/2012 | 4:56:07 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

I'll be interested to see how they price it for some of the reasons you mention. They can't get away with charging more for the next-gen product;  if they want to get any serious adoption and penetration of this new product, they, at the very least, will have to price it the same as their existing digital stuff and do swap-outs whenever they have to roll a truck to an existing customer and give all new digital customers the new platform. 


Granted, they're going to have to take a bit of a hit on some STB capital if they are at all serious about reversing -- or at least trimming down -- the video subscriber losses in a material way. From the demos, the new Web-like, cloud-based nav system is a world of difference better than their current guide, but I haven't had any hands on with it. I've got access to their Xfinity TV app for the iPad, and that's a quantum leap ahead of anything they've been able to do in the boxes that don't speak a lick of IP. Still, I'm still a bit skeptical that they'll be able to hit near break-even on video subscriptions by 2013, as one analyst who was pretty bullish about the coming video platform  predicted in July.   JB


 

ravanelli 12/5/2012 | 4:56:06 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

I don't believe consumers are going to flock back to MSOs because of multi-screen, or on-the-go tv viewing with an iPad.  It makes for a cool demo or ad, but most of us just want to have a decent living room experience and not pay $100/month for it, especially for a bunch of channels we don't care about.


They should look at what is hurting them- flexible content options at a lower price, which plays well in tough economic times.  First give subscribers what they want, more granluar choices in programming and pricing, then go after the "experience" play for the higher end customers.

FbytF 12/5/2012 | 4:56:02 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

Two years ago Comcast was rated as the worst company in America, this year they moved up to the 3rd worst company in America.  No I don't work for Verizon or AT&T but look at the numbers of added subscribers by AT&T/VZ versus the number lost by Comcast, it's more than just the economy, people are switching and the 2 biggest drivers that lead people to switch are price and service.  Once Verizon or AT&T move into an area and consumers have a choice, there is pent up demand for something better so subscribers switch.  Satelite can't compete because they can't offer a data solution or voice services so the only reason to switch to Satelite is cost, service isn't much better than Comcast but at least it's at a lower cost.  Take a chill pill the stress you're under must be unbearable. 

comtech3 12/5/2012 | 4:56:02 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

You must be a Verizon employee,and if so,why are you not on the picket line? It is people like you who help to drag the US down the pit with your ignorance. First off the bat, Comcast does not offer Third World services,but rather innovative technologies  that are found no where else in the world.Comcast and the other cable companies fund Cablelabs,who makes it possible for Verizon to be using set-top boxes. I guess you did not know that?


Secondly, just look around any neighorhood where Fios is installed and do a house count as to who has Verizon, or Comcast.You would be dissappointed that the ratio is 10:1 in favor of Comcast! You cannot use your own parochial experience as a measure to come here and bash anyone company, whether it is Comcast, Verizon, or AT&T  without doing your homework.Customers will always have problems from time to time with their service providers,but it does help when people like you make unfounded blanket statements like the ones just made only serves to bring out your lack of intelligence.

comtech3 12/5/2012 | 4:55:57 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

Well, my friend.I work for Comcast,and prior to that, Suburban Cable,then Adelphia.More than fifteen years in the cable bizz.RCN tried to challenge us in Delaware County,but failed miserably.In fact, they went into bankrupcy.When they first appeared on the scene,not only were customers fleeing to them,but some of Comcast's employees as well.They came with like a suitor in search of a queen,making promises they could not fulfill.Now their taps look like a cable bone yard!.The FiOS taps are becoming a collectors item themselves because no one is running to get it.And my friend, it may be the general cost of things why people are cutting back. That is a different argument than people seeking a cheaper alternative  because in the long run, FiOS is more expensive and Verizon is going to take a life time to break even on the $23 billion they've spent so far.

The number are telling.The cable companies have loss some basic subs, Directv and Dish,but the telcos have not gained much. So how ccould you make yourself even more stupid by saying Comcast is the worse cable company,but there are no mass exodus of it's customers? Have you seen the profits being made? In other words,people are just as stupid as you are to be paying their money to the worse cable company! I'm using your stupid logics against you.








comtech3 12/5/2012 | 4:55:57 PM
re: Q2 Video Scorecard: Cable, Satellite Get Creamed

Well, my friend.I work for Comcast,and prior to that, Suburban Cable,then Adelphia.More than fifteen years in the cable bizz.RCN tried to challenge us in Delaware County,but failed miserably.In fact, they went into bankrupcy.When they first appeared on the scene,not only were customers fleeing to them,but some of Comcast's employees as well.They came with like a suitor in search of a queen,making promises they could not fulfill.Now their taps look like a cable bone yard!.The FiOS taps are becoming a collectors item themselves because no one is running to get it.And my friend, it may be the general cost of things why people are cutting back. That is a different argument than people seeking a cheaper alternative  because in the long run, FiOS is more expensive and Verizon is going to take a life time to break even on the $23 billion they've spent so far.


The number are telling.The cable companies have loss some basic subs, Directv and Dish,but the telcos have not gained much. So how ccould you make yourself even more stupid by saying Comcast is the worse cable company,but there are no mass exodus of it's customers? Have you seen the profits being made? In other words,people are just as stupid as you are to be paying their money to the worse cable company! I'm using your stupid logics against you.


 


 

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