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Cord-Cutting to Blame? DirecTV Loses 84,000 Subscribers

No. 1 satcaster posts second-ever net loss of U.S. subscribers in second quarter

In its second-ever quarterly loss of U.S. subscribers, DirecTV dropped a higher-than-expected 84,000 net video customers in the States during quarter ended June 30 — a signal that cord-cutting could be taking root in the pay TV sector.

The second quarter is seasonally the weakest for pay TV operators. But it’s only the second time DirecTV, the largest subscription TV provider in the U.S., shrank subscriber rolls after a net loss of 52,000 in the second quarter of 2012.

SEE ALSO: Top Wall Street Analyst: Pay TV “Cord-Cutting Is Real”

On a year-over-year basis, DirecTV barely inched up, rising 0.5% to 20.02 million U.S. customers. Over all, satcaster posted 7% increase in revenue, to $7.70 billion, while net income fell 7%, to $660 million, in the period. DirecTV boasted higher revenue per customer in U.S. as well as subscriber adds for DirecTV Latin America — although growth slowed considerably in Latin American unit, with 165,000 net new subs (versus 645,000 adds in the year-ago period).

It’s too soon to tell how the overall U.S. pay TV segment fared in Q2, as several providers, including Dish, Charter and Cablevision, have yet to report results. But this year, the biz suffered its first net loss of subscribers on a year-over-year basis, as the 13 biggest U.S. cable, satellite and telco TV providers lost about 80,000 subscribers for the 12 months ended March 31, according to an analysis by Leichtman Research Group.

Multiple factors have put pressure on U.S. pay TV, as programming costs have continued to soar and with the price of TV packages subsequently increasing as well. A small but apparently growing number of consumers clearly are cutting the cord in favor of cheaper Internet video options like Netflix, Hulu Plus and free over-the-air TV.

DirecTV specifically is hampered relative to cable and telco rivals by lacking its own broadband offering (a shortcoming Dish is trying to address with branded satellite-based Internet service).

Meanwhile, pay TV is a mature category and cable, satellite and telco TV operators are more focused on profitable customers — willing to lose an incremental number of price-sensitive consumers. To wit, DirecTV’s U.S. average revenue per unit (ARPU) grew 4.6% in the second quarter, to $98.73.

For the second quarter, Time Warner Cable also posted higher-than-expected video subscriber losses Thursday, with a net decline of 191,000 subs, and Comcast lost 159,000 in the period.

Telcos continued to pick up share in Q2, with AT&T adding a net 233,000 U-verse TV subs and Verizon gaining 140,000 FiOS TV users, but it is unlikely those pickups will offset cable and satellite losses in the period.

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