Subscriber numbers were down--not necessarily negative, but down--across the entire MVPD space for the second quarter, leading IHS Screen Digest to predict that times are tough and could remain that way for pay-TV providers this year.
Net subscriber additions
Market-research firm IHS iSuppli reported pay-TV providers lost a combined 348,000 subscribers in the second quarter, just slightly worse than the 340,000 subscribers who went away during the same period in 2011.
Both AT&T (NYSE: T) U-verse and Verizon (NYSE: VZ) FiOS, it should be noted, gained subscribers; just not as many as in the past. As usual, there was one big factor to blame, almost every MVPD said. It was the season of the switch for college students who turned off the lights and the TV service and went home for the summer.
Nevertheless, U.S. television analyst for IHS, Erik Brannon, while acknowledging the seasonality factor, saw something potentially more ominous in the numbers.
"Poor economic conditions played a role in declining subscriber additions for pay TV operators in the second quarter," Brannon said. "Another challenge was in the competitive threat posed by OTT services such as Netflix (Nasdaq: NFLX). Consumers are spending an increasing amount of time using Netflix at the expense of traditional services like cable and satellite, which may lessen the incentive to retain a pay-TV subscription."
Brannon said the pay-TV business remains stable.
"Our view that the business will remain sound has not changed," he said. "However, it is important to note the widening gulf in the number of TV households versus pay TV households."
One reason for that, he said, is the rise of Netflix, which has continued a steady climb--despite, or maybe with--the popularity of the London Summer Olympics. The jury's still out on that.
Interestingly, IHS also took note of less acquisition activity within the cable industry during the period and this year, when the biggest deal has been Cogeco's (TSX: CGO.TO) purchase of Atlantic Broadband.
Overall, the analyst firm agreed with what pay-TV operators have been saying all along: a bundle of services mixed with an ever-mobile content provisioning platform like TV Everywhere will retain subscribers and even attract new ones into the fold.
"Pay TV players are betting that by adding extra value for their subscribers--with new offerings like TV Everywhere, faster Internet speeds and deep discounting promotions--they can stem the tide of subscribers defecting to OTT and entice new ones," Brannon said.
- read the release
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