Pay TV growth crept into negative territory again in the third quarter, driven by slower increases at telco and satellite-TV service providers.
While cable improved its losses, the results pointed to an increase in cord-cutting activity, just not of the type that first comes to mind.
Pay television subscribers fell by about 127,000 customers in the third quarter, according to Sanford Bernstein cable and satellite analyst Craig Moffett. That is five times the 25,000-subscriber decline in the same period last year, but well below the 170,000 lost in the third quarter of 2010.
ISI Group media analysts Vijay Jayant and David Joyce estimated pay TV posted a slight gain in the period — about 30,000 customers — but counted only the publicly traded operators.
TYPICALLY UP
The analysts said last week that accounting for non-public MSOs, pay TV would have fallen into negative subscriber territory again.
Jayant and Joyce said the third quarter is usually the rebound quarter for cable operators, coming after the seasonally weak second quarter, when snow birds and college students disconnect service.
Although cable performance was weak — Comcast and Cablevision Systems accounted for all of the improvement in the sector, losing a combined 58,000 fewer video customers in the period while their peers lost more — there was another strong showing for high-speed Internet customers. The four publicly traded MSOs added 482,000 HSI customers, ahead of the 424,000 they added in the same period last year.
Satellite-TV added only 48,000 net new customers in the third quarter this year, compared with 216,000 additions a year ago.
DirecTV added 67,000 net new customers in the quarter, down from 327,000 additions a year ago. The satellite giant said its ongoing policy to attract higher quality customers — i.e., those who purchase more advanced services — and a nine-day carriage battle in July with Viacom’s 26 cable networks helped temper gains.
Telco operators Verizon Communications and AT&T increased their customer additions slightly in the quarter, adding a collective 324,000 new video subscribers versus 303,000 additions in the prior year.
Moffett said the declines will likely add fuel to the cordcutting debate, but not in the way that most industry observers think.
“Certainly, there is no evidence that customers are dropping subscriptions in droves in favor of Internet-based content,” Moffett wrote in a report. “Rising costs of cable service, however, are undoubtedly becoming more burdensome for lower-income households, increasingly the likelihood that some households are reverting to rabbit ears (cable losses, at least, continue to be concentrated among low-end ‘broadcast basic’ subscribers).”
HOME STARTS
Moffett did note that an apparent improvement in household formation could yield a larger pool of subscribers. And as cable operators approach market-share equilibrium with their competitors, customer losses should continue to improve and could even sneak into positive territory.
For satellite operators, Moffett said the sluggish results could provide fuel for a possible merger between top players DirecTV and Dish Network in the next 12 to 18 months.
