After pay-TV operators lost a record 625,000 video customers in the second quarter, analysts said the sector had reached a point at which cord-cutting would be a ubiquitous part of all future quarterly earnings presentations.
But starting with Comcast's (NASDAQ: CMCSA) solid report on video subscriber losses Tuesday (down only 48,000, Comcast's best performance in six years), the story started changing. Pay-TV might not be succumbing to the barbarian hordes of over-the-top distribution, after all. Customers, who migrated by the millions from cable to satellite and telco services during the past decade, seem to be simply migrating back.
This revised narrative strengthened today, with Time Warner Cable (NYSE: TWC) reporting a narrow video subscriber loss of only 7,000 -- the company's best third quarter since 2006. Charter Communications (NASDAQ: CHTR), meanwhile, touted a gain of 12,000 subs.
Said Bernstein Research analyst Todd Juenger: "Yesterday in our media earnings preview we hypothesized that a 'good' result on Q3 pay-TV subs would not drive media stocks higher (at least sustainably), because it wouldn't be enough to convince the market that cord-cutting isn't an increasing threat going forward. Today that hypothesis will be tested, as TWC (and to a lesser extent, Charter) posted video sub net adds much better than expected and much better than last year."
Evercore analyst Vijay Jayant said that "Video trends [are] improving with cable leading the way -- with ~70% of the industry having reported 3Q15 results, video losses have so far shown great improvement. Total video subscriber losses for the companies that have reported so far have been 67k, in-line with our estimates. Cable leads from the front with Comcast, TWC and Charter reporting excellent video results."
"We believe that 2Q15 was impacted by seasonality and company-specific corporate-level actions and we expected 3Q15 video trends to bounce back from the lows experienced in 2Q15," Evercore's Jayant added.
Source: Evercore
"It's time to change the narrative about cord cutting," said MoffettNathanson analyst Craig Moffett. "Each of Comcast, TWC, and now Charter have blown away expectations for video subscriber losses, with Charter posting a subscriber gain. All three are now outperforming pay TV as a whole. Cable is taking share."
The strong cable subscriber metrics -- Comcast, TWC and Charter all believe they can finish 2015 with actual video customer growth -- comes as the previously incendiary growth of AT&T and Verizon's pay-TV services has abruptly ended.
Speaking to TWC's competitive situation during his company's third-quarter earnings call, TWC Chairman and CEO Rob Marcus said some of his MSO's strongest subscriber growth came in markets in which it directly opposes AT&T U-verse and Verizon FiOS.
Indeed, Verizon (NYSE: VZ) last week reported video customer growth of only 42,000, while AT&T (NYSE: T) -- which is shifting focus away from its newly purchased DirecTV platform -- reported attrition of 92,000 customers for U-verse. DirecTV, meanwhile, had a rebound third quarter, adding 26,000 new customers.
Analysts are not expecting huge gains for Dish Network (NASDAQ: DISH), which shed 12,000 video subs in the third quarter last year.
Cable executives and analysts are crediting cable's improved user experience for the better subscriber metrics, noting the appeal of advanced video delivery systems like Comcast's X1 platform, as well as Charter's Spectrum Guide and TWC's Maxx.
Evercore's Jayant also pointed to the success of cable in the broadband arena. "Cable, with a superior broadband product, has been taking broadband market share for the last few years now," he said today. "Broadband net additions for the public cable companies continued to be very strong in 3Q15. Comcast added 320k, TWC added 232k and Charter added 131k broadband subscribers in 3Q15. In contrast, Verizon added only 2k broadband subscribers (FiOS +114k and DSL -112k) while AT&T lost -106k broadband subscribers (IP +172k and DSL -278k)."
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