Pay-TV operators see 193,000 subs bolt in Q2; will a stuttering economy make Q3 worse?

editor's corner
Jim O'NeilSubscriber losses continued this week as Cablevision (NYSE:CVC) and Dish Network (Nasdaq: DISH) reported earnings that showed profits for both companies in the past quarter but fewer customers for both the cable and satellite operator.

Cablevision lost 23,000 customers; the company blamed the losses on the economy and high vacancy rates in the housing market (which has been SOP for cable operators over the past eight quarters as subscriber bases have eroded).

Dish suffered a bigger hit, losing 135,000 net subs (analysts expected the company to lose between 31,000 and 60,000) and blamed the loss on increasing competition and higher levels of discounting.

So far this earnings season, Comcast (Nasdaq: CMCSA) reported it lost 238,000 subs, Time Warner Cable (NYSE: TWC) dropped 130,000 and Charter Communications lost 79,000.

Ryan Vineyard, an analyst at RBC Capital Markets in New York, told Bloomberg that, "Every cable operator that's reported has missed subscriber expectations, and DirecTV, same thing. Some of it was economic, and some of it was competitive intensity."

But not every operator lost subscribers. AT&T (NYSE: T) saw its U-Verse TV business gain 202,000 new customers, Verizon's (NYSE: VZ) FiOS TV added 184,000 and satellite provider DirecTV (Nasdaq: DTV) picked up 26,000.

The net for the quarter with the big boys reporting? A loss of 193,000, in the same ballpark as the number of subscribers pay-TV operators lost in the like quarter a year ago.

But the difference, of course, is that operators saw growth looming in last year's third quarter. This year, with the tenuous state of the economy, they may be hard pressed to make up for those losses in the second quarter, a traditionally soft quarter.

Dish, during its earnings call, said it would hold the line on prices through 2013. Other operators, like Cablevision, Comcast and Time Warner Cable, are hurriedly looking to enhance their own positions with subscribers by increasing value added propositions like TV Everywhere and multiscreen delivery.

Cablevision today launched an app for Apple (NASDAQ:AAPL) iPhones and iPad touch devices that turn them into remotes and allows them to receive all of its linear programming, over 300 channels, just like the iPad app in launched in April.

But will it be enough?

Connected TVs are starting to become more common in U.S. homes, and with CE retailers like Best Buy (NYSE: BBY) launching their own lower-end models in time for the holiday buying season, the number of Internet-ready TVs in the U.S. could grow significantly this year. Display Search last month said there will be 138 million connected TVs shipped in 2015, roughly half of all TV shipments.

Operators have to be more than a little worried.--Jim

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