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Pay TV Shows Strength by Holding Steady

Pay TV’s 125,000 video-subscriber losses in 2014 were about the same as in the previous year, according to Leichtman Research Group, but cable continued to show its resilience by reducing video losses for the second straight year.

The MSO sector also extended its utter dominance of the broadband market, accounting for about 89% of the growth in high-speed Internet customers for the year.

Cable operators have seen losses decline in the past two years — according to Leichtman, they lost about 1.7 million video subscribers in 2013 and 1.2 million in 2014 — mainly at the expense of satelllite and telco video growth.

Per Leichtman, satellite operators added just 20,000 net new video customers in 2014 (compared to 170,000 in 2013), while telcos added 1.06 million video customers for the year, compared to 1.46 million in 2013.

At the same time cable faces a potential onslaught from additional over-the-top threats — HBO, Sony and Verizon Communications are expected to join current OTT products from Dish Network’s Sling TV and CBS later this year — cable appears to be holding its own. And the impact of cordcutting, while still a hot-button issue, may not be as serious as some may believe.


The cable sector shed the fewest number of video subscribers since 2008, according to Leichtman. The performance, led by Comcast, Time Warner Cable and Charter Communications, comes as the competition has heated up to include online and subscription video-on-demand distributors, in addition to traditional telco and satellite foes.

Still, the top three cable operators had some of their strongest years ever, with Comcast down 194,000 basic video customers, a 27% improvement over 2013; Time Warner Cable down 408,000, less than half the 833,000 lost in 2013; and Charter down 49,000 basic video customers, 60% better than 2013.

“Given all the headwinds, it’s interesting to see how resilient the pay TV market has been,” LRG president and principal analyst Bruce Leichtman said.

Some still think that, given fourth-quarter housing growth, pay TV’s decline proves that cord-cutting is real and is growing.

According to the U.S. Census Bureau, occupied housing grew at its fastest pace since 2005 in the fourth quarter, with 1.3 million household additions.

MoffettNathanson principal and senior analyst Craig Moffett said data points to an increase of about 1.4 million “cordnevers,” or people who have never subscribed to pay TV service. “On a trailing twelve month basis it appears that 1.4 million homes have cut (or never had) the cord, the highest twelve month total yet,” Moffett wrote in a research note that cautioned census data is notoriously volatile.

Leichtman said the census data misses subscribers that pay TV providers have weeded out because of bad credit. All three segments have initiated strict policies in signing on new customers, requiring either a credit or debit card before turning on service.

“As providers become more disciplined in who they are acquiring, that either opens the door for others to go more moderate and lowend or just leave these subscribers to others,” Leichtman said. “That’s where subscribers could be lost over time.”

Leichtman said cable is demonstrably taking back video share from satellite and telco operators. Telco share likely is declining because those companies aren’t building out any more plant, and satellite share is dwindling because owner-occupied home growth is stagnant. While total occupied housing rose in the fourth quarter, owner-occupied housing is at 2004 levels. Almost all of the growth was in rental units, which don’t typically allow satellite dishes.

“Everyone who had a [pay TV] service and doesn’t currently have one is now being called a cord-cutter,” he said. “That’s ludicrous. People have always gone in and out of the market.”


Despite the volatility of video, Leichtman said broadband additions in 2014 surpassed those of the previous year — the first time that has happened since 2005-06 — signaling the high-speed data business still has some life left in it.

Cable accounted for 89% of those 3 million additions, Leichtman said, led by Comcast with 1.3 million additions for the year and Time Warner Cable, with 596,000 additions.

Leichtman said the growth is due — believe it or not — to customers giving up dial-up connections and DSL service, and stepped up efforts by cable to increase double- and triple-play penetration. In the last three months of 2014 alone, for example, Time Warner Cable added 273,000 triple play (voice, video and data) customers, its best fourth quarter ever.

“Time Warner Cable completely changed their business,” Leichtman said. “They obviously took on the Comcast way of doing business in anticipation of the merger.”