Pay-TV shed over 300K video customers in Q2, cord-cutting on par with 2014

Cable, satellite and telco-based TV operators lost more than 300,000 video customers in the second quarter, a tally on par with the nearly 320,000 subscribers lost during the same period of 2014.

With nine out of the top 10 publicly traded pay-TV companies reporting second quarter earnings so far, only Verizon (NYSE: VZ) has reported a gain in video customers for the quarter, albeit its narrowest ever at 26,000 subscribers.

Top cable companies including Comcast (NASDAQ: CMCSA, down 69,000 subs) and Time Warner Cable (NYSE: TWC, minus 45,000) had their best second-quarter subscriber numbers in years. But the improvements couldn't offset the sudden maturity of pay-TV's telco sector, which gained only 4,000 subscribers after AT&T (NYSE: T) reported a 22,000-user declined for its U-verse video service.

Likewise, satellite is in full decline, too, with Dish Network (NASDAQ: DISH) reporting a recession of 81,000 subscribers. Analysts believe its core satellite TV services actually lost many more, but the company's final tally was lifted by the gains of its over-the-top Sling TV service. 

FierceCable's tally -- which also includes Charter Communications (NASDAQ: CHTR, down 33,000 video subscribers), Suddenlink (off 29,400 subs) and Cable One (minus 21,400) -- found a total of  286,800 consumers leaving the pay-TV ecosystem. The number is likely significantly higher, with AT&T closing on its DirecTV purchase before the satellite operator could report second-quarter earnings. 

FierceCable is still waiting for a response from AT&T on how it's going to report earnings for its new DirecTV (NASDAQ: DTV) acquisition. But given that DirecTV lost 84,000 U.S. subscribers in the second quarter of 2013, and another 34,000 in the second quarter of 2014, a gain by the satellite operator this time around seems unlikely.

Likewise, Cablevision (NYSE: CVC) -- which has lost 37,000 and 28,000 in the last two second quarters -- reports earnings Friday morning, and will not move the cord-cutting needle towards zero. 

The second quarter is typically pay-TV's weakest for subscriber growth. Going into this latest round of earnings reports, MoffettNathanson analyst Craig Moffett predicted in July that 2015's second quarter could be a watershed moment as far as cord-cutting is concerned. 

"Seasonality won't help," Moffett said in his July 13 note to investors. "The second quarter is always the weakest of the year. We estimate that the pay TV sector shed 321,000 subscribers in Q2 of last year. This year, we expect that number to be markedly worse."

So now that the second quarter's pay-TV attrition is just as bad -- but not markedly worse -- than the comparable period last year, does that alleviate cord-cutting concerns?

"Drop drop drip. It doesn't matter if economy is strong or what marketing tactics they try. This is what slow secular decline looks like," Diffusion Group senior analyst Joel Espelien told FierceCable.

Parks Associations Director of Research Brett Sappington added: "The market has hit a bit of a perfect storm -- a decline in cable subscribers, increasing popularity of OTT video services, and a slump in revenues for some iconic content companies. The net result is increased anxiety over cord cutting."

With investors hammering both programmer and pay-TV stocks this week amid concerns about the disaggregation of the pay-TV bundle, cord-cutting anxiety has never been greater. Every major publicly traded programming and pay-TV conglomerate saw a decline in their stock price Wednesday, when Walt Disney Company CEO Bob Iger confirmed that ESPN has indeed lost subscribers recently, and that is due to the overall erosion the pay-TV ecosystem.

As programmers including Disney, Time Warner Inc. and Viacom sought to ensure investors that the pay-TV bundle remain intact in the near term -- and that their networks will remain "must-see" assets even if it isn't -- cable companies continued to reposition themselves as "data" and "connectivity" specialists that are moving away from video and towards broadband.

This strategy seems to be working for vertically integrated giants like Comcast, which added 180,000 broadband users in the second quarter and now has more Internet customers than video subscribers. The company saw a 6.3 percent uptick in cable communications revenue in the second quarter.

But the story is a little different for some smaller and mid-sized cable companies.

For example, at his company's first quarterly earnings call as a standalone corporation, Thomas Might, CEO of Phoenix-based Cable One, said Thursday that his MSO first identified maturity in the video business in 2007 and has worked to prioritize non-video assets, such as broadband, since that time.

Cable One only added 505 broadband users in the second quarter, however, and its revenue actually decreased by 1.2 percent to $202.7 million.

Related articles:
Programmer and pay-TV stocks get crushed as ESPN woes spur concerns of cord cutting, skinny bundles
Cable One loses 21.4K pay-TV subs in Q2, but minimal broadband gains are a concern
Moffett: Customers to drop cable TV subscriptions at even faster rate in Q2

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