Skip to main content

Subs — More Than Expected — Flee Cable, Satellite

The pay television sector had its
weakest period ever in the second quarter,
driven by larger-than-expected declines
in the satellite sector and steady losses for
cable operators.

Overall, video customers from cable, telcos
and satellite providers fell by 380,000
subscribers in the second quarter, down
from a loss of 162,000 in the same period last
year. Perhaps equally troubling, the most
recent losses were greater than those in last
year’s second and third quarters — the first
negative quarters ever reported — combined.

While cable video losses remained fairly
consistent — cable operators lost a combined
657,000 subscribers in the period,
similar to the 624,000 lost in the prior year
— there were heavy declines at Dish Network
and lighter-than-expected gains at DirecTV.


Dish Network, which reported second-quarter
earnings on Aug. 9, lost 135,000 net new
customers in the period, compared to 19,000
it lost in the prior year, and well above analysts’
consensus estimates of 31,000 net
customer losses. Earlier, the usually strong
DirecTV reported just 26,000 net new customer
additions in the period, down from
100,000 net new additions in the prior year.

Dish said that it would freeze prices
through January 2013, partly in response to
the losses.

In a research report, Sanford Bernstein cable
and satellite analyst Craig Moffett wrote
that a mixture of seasonality, the economy
and the absence of housing growth all
played a role in the declines. While satellite’s
performance showed the vulnerability
of having only one product (video) to
sell, he added, cable’s three-product offering
could provide a needed crutch in times
of economic hardship.

“They [cable] can fall back onto their strongest
product, broadband, to sustain results,”
Moffett wrote. “And, over time, this strength in
broadband may also be used as a tool to reclaim
share in the video business from satellite.”

But even broadband took some hits in the
quarter. Cablevision Systems, the last MSO
to report second-quarter earnings on Aug. 9,
added just 5,000 high-speed Internet customers
in the period, down from 27,000 in
the prior year. Moffett wondered if Cablevision’s
outstanding past growth (it has the
highest penetration rate for broadband in
the industry) has finally caught up with it.

“Investors have long pined for Cablevision
to be a pure-play cable operator,” Moffett
wrote. “Now that they’ve spun off AMC Networks,
they are. Be careful what you wish for.”

Pivotal Research principal and media and
communications analyst Jeff Wlodarczak
was equally disappointed with the results,
but pointed to its Bresnan Communications
acquisition and the potential of commercial
services as bright spots.

“We highlight that the company continues
to operate within effectively a duopoly,
its Bresnan systems are likely to
produce above average growth, there
is still a sizeable SMB and advertising
opportunity, and the company
continues to innovate on new products,”
Wlodarczak wrote.


On an earnings call Aug. 9, Cablevision
chief operating officer Tom Rutledge
said the subscriber losses in
what is normally a seasonally strong
period were impacted by more aggressive
offers from competitors,
non-existent housing growth and the generally
weak economy. And he stressed that
there is still ample room for growth.

Cablevision continues to roll out new
products and enhancements to existing offerings
that are attractive to customers, he
added, noting the rollout of its network digital
video recorder service in Nassau County,
N.Y., this fall and in Suffolk County next
year. Cablevision has also launched apps for
Apple’s iPad, iPhone and iPod Touch that allow
customers to watch live TV on the devices
inside their home and is in talks to expand
that to usage outside of the home.

“We are acquiring rights to have an outof-
home service, we’re putting those together
into packages and we will make that
available to our customers in the relatively
near future,” Rutledge said.