Despite cable sector losses that were less severe than a year ago, the US pay-TV industry suffered its worst third quarter ever, shedding a record total of video subscribers.
That information comes from the Leichtman Research Group Inc. (LRG) . In its latest report, LRG found that the 13 largest US pay-TV providers, representing 95% of the total multichannel video market, collectively lost 150,000 video subscribers in the third quarter. That's far worse than the 25,000 video customers the 13 providers lost a year ago and represents by far their worst performance ever for a third quarter.
Notably, the heavier video losses came even though cable operators stemmed some of the bleeding from the previous year. The top nine US MSOs lost a total of 439,000 TV subscribers in the usually weak summer quarter, which is certainly nothing to brag about but still represents a marked improvement over the 600,000 subscribers they lost in the year-ago period. Just as it did a year earlier, Time Warner Cable Inc. (NYSE: TWC) led the way down, dropping 182,000 video customers.
But it wasn't just the cable operators that lost customers. The two big US satellite TV providers combined for a loss this summer, reversing their gains from the same period a year ago. Combined, DirecTV Group Inc. (NYSE: DTV) and Dish Network LLC (Nasdaq: DISH) shed a total of 40,000 in the third quarter, with DirecTV accounting for the lion's share of the decline. In the year-ago period, the two satellite TV companies netted a total of 174,000 subscribers, with DirecTV accounting for most of that gain.
To exacerbate the situation, the two big US phone companies picked up somewhat fewer new video subscribers on their fiber-fed networks than they did a year earlier. AT&T Inc. (NYSE: T)'s U-verse platform and Verizon Communications Inc. (NYSE: VZ)'s FiOS platform combined to add 330,000 TV customers, with U-verse easily contributing the larger portion. In the summer of 2013, the two telcos combined for a gain of about 400,000 video subscribers.
Yet, even with these poorer results, two leading industry analysts don't think the bottom is dropping out of the pay-TV industry -- at least not yet. Even as he highlighted the industry's steeper subscriber losses, Bruce Leichtman, president and principal analyst of LRG, dismissed concerns about a fresh wave of consumer cord-cutting rolling over the industry. (See US Pay-TV Penetration Falls From Peak.)
"The pay-TV industry is characterized by seasonality," he said. "While the first and second quarters of 2014 showed modest improvements over 2013, the third quarter was down from a year ago. If recent history is an indicator, the pay-TV industry will follow the fourth quarter trend and close 2014 with a modest subscriber gain in the quarter."
Similarly, media stock analyst Craig Moffett, who calculated the third-quarter losses even higher at 179,000 video subscribers, shrugged off fears that consumers are fleeing pay-TV providers in great numbers in order to flock to Internet video services. With the rash of new OTT services that are now launching or are in the works, he expects the current "drip, drip, drip" customers losses due to cord-cutting to "accelerate" in the coming months. But even then he doesn't expect the cord-cutting rate to shoot up dramatically.
"A faster drip, drip, drip is still a drip, drip, drip," wrote Moffett, a principal in MoffettNathanson Research. "The more dire fears of a seismic disruption still seem highly unlikely."
— Alan Breznick, Cable/Video Practice Leader, Light Reading