Pay-TV operators ditching lower-income customers, driving up average revenue per sub, analyst finds

A focus on higher-income customers by pay-TV operators is driving both cord-cutting and average revenue per customer, Strategy Analytics analyst Jason Blackwell said to FierceCable

"Over the past few quarters we have seen price increases from Dish Network and DirecTV as well as other Pay TV operators," Blackwell said. "But, there is also evidence from our primary research that cord-cutters could actually be driving up the ARPU (average revenue per user) as well. We are finding that a large number of those people who have dropped a pay TV service have lower household incomes."

In a report issued last week, Blackwell noted the contrast between a record-setting second quarter for cord-cutting and sharp increases in per-customer revenue.

Source: Strategy Analytics

DirecTV (NYSE: T), for example, lost 133,000 subscribers during the second quarter, but saw per-customer revenue increase by 6.4 percent to $109.93. Dish Network (NASDAQ: DISH) lost 81,000 customers in the second quarter but had a 4.4 percent increase in per-user revenue to $87.91.

On the cable side, meanwhile, Charter increased its revenue-per-customer by 4.5 percent to $92.88 as it was losing 33,000 pay-TV customers in the second quarter. 

Overall, the top pay-TV providers saw their per-video-customer revenue increase by 6.7 pecent in the second quarter. 

Counting the top operators controlling 90 percent of the market, Blackwell said the pay-TV sector lost 479,000 video subscribers in the second quarter. (Note: SNL Kagan's more comprehensive tally of more than 70 operators revealed the loss to be 625,000.)

Nearly 12 percent of U.S. households surveyed by Strategy Analytics and reporting annual income of less than $25,000 said they got rid of pay-TV and now only have free, over-the-air broadcast services. Only around 6 percent of homes with yearly incomes over $50,000 ditched cable. And only 4 percent of homes with incomes over $100,000 cut the cord. 

"Pay-TV operators are losing customers who were taking packages at lower price points, in a disproportionate ratio to those at higher price points," Blackwell said. "This will also push the ARPU higher.

One of the themes from the recently completed round of second-quarter pay-TV earnings reports was a focus on keeping higher-end "triple-play" customers and eschewing price promotions. Operators also say they're drawing a firmer line on pricing and credit policies. 

"We chose to compete on value, not solely on price by taking a more disciplined approach to promotional eligibility and customer credit policies," said Cablevision (NYSE: CVC) CEO James Dolan.

For more:
- read this Strategy Analytics press release

Special Report:  Top 9 cable, satellite and telco pay-TV operators in Q2: Ranking Comcast to TWC to Charter to Cablevision

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