The second quarter was a perfect storm of bad news for cable operators.
According to a survey by SNL Kagan, cable operators shed 711,000 subscribers during the period, driving the subscription TV market (comprised of cable, satellite and telco TV providers) to its first quarterly net loss of subs since Kagan began tracking such data in 1980.
Telco providers AT&T and Verizon Fios added 414,000 subs during the frame, and satcasters added 81,000. But that still wasn’t enough to offset the losses
incurred by cable operators.
The second quarter is typically a weak period for subscription TV growth because it’s an active time for consumers to move (at the end of the school year) and a time when consumers are more likely to drop services as some focus on summer travel plans and warm-weather pursuits.
At present, the difficult economy and sustained unemployment and underemployment levels are big contributors to subscription TV churn. And more viewers are opting to go without a traditional subscription TV package in favor of broadcast TV, Internet vid services and alternative providers like Netflix. SNL Kagan pegs the number of those households at 2.4%, or 2.8 million households, up from 1% the same time last year.
Moreover, the second quarter also marked the expiration period of discount packages offered last year by cable, satellite and telco operators when the nation’s broadcasters transitioned to all-digital telecasting. Subscription TV providers sought to capitalize on the consumer confusion about what was required to maintain TV service by offering low-cost packages to new subscribers.
“This quarter saw a confluence of negative events that impacted the industry,” said SNL Kagan senior analyst Ian Olgeirson.
Cable operators’ share of the subscription TV market slid to 61% in the second quarter, down from 63.6% in the year-ago frame. Telcos climbed to 6% from 4.3% while satcasters DirecTV and Dish gained less than 1%, according to SNL Kagan.
Before 2002, cable operators consistently added subscribers, rolling out new services and expanding channel packages that lured consumers. But cable has felt the pinch in recent years as satcasters and telcos grew into stronger competitors.
Olgeirson stressed that the second quarter decline was something of an anomaly, and that future growth is predicted for the subscription TV market. But the losses incurred by cable operators are a warning to all providers “that the margins for error with consumers are pretty slim,” he said. “Even with a small proportion of the population opting (to go without subscription services), it’s enough to make an impact.”