U.S. Pay-TV Suffers its Worse Subscriber Loss to Date
The second quarter of the year proves to be challenging quarter for Pay-TV operators, and 2Q12 was no exception, as subscriber declines hit their highest levels to date. U.S. Pay-TV operators (MSOs, Satellite, Telco) lost a combined 364,000 subscribers.
Although, “typical seasonality” is partially to blame; rising monthly fees, combined with retransmission disputes which forced some operators to drop popular channels combined with reduced promotional discounts and a focus on higher-value subscribers also contributed to declines.
But this loss of subscribers is not necessarily bad news to the operators – in fact, many operators reported strong earnings and increasing revenues during the quarter.
DIRECTV which reported its first subscriber declines in its history – also stated an ARPU growth rate of 4.2% in the quarter – driven not only by annual price increases, but strong pay-per-view, premium channel and advanced services sales.
Comcast also experienced strong APRU growth – driven by customer taking higher levels of digital and advanced services.
Time Warner Cable, which lost 169,000 video subs – stated that most of it was analog singles – while new video connects are not only adopting premium video services, but also taking high-speed Internet and voice services. At the end of 2Q12, TWC has more customers taking double or triple play services than a single service – a trend that is common across the MSOs.
On the Telco side, Verizon stated that its slower than average video subscriber growth as associated with “some” seasonality, but more likely due to “price-ups” associated with its service set-top box rental and according to Verizon “more price-ups coming in the third quarter around the bundles and into the fourth quarter”.
AT&T also experienced lower than average net add this quarter, but provide no guidance or real discussion around its product during its quarterly call.
Another key trend, was an increased emphasis on e-commerce (on-line ordering of service) and self-installation. TWC introduced its Easy Connect program, which enables self-installation of a broader range of products – allowing customers to install services on their schedule and save installation fees. As such, TWC is seeing strong growth in the number of customers self-installing service.
Is Cord-Cutting Accelerating?
Although the loss of subscribers during 2Q was higher than average, we would need to see a few consecutive quarters of this trend to say that cord-cutting is accelerating. This did not happen in 2011 and it is unlikely to occur during 2012 as more operators introduce and expand their TV-Everywhere products.
Additionally, the Olympics have played a key role in introducing more subscribers to TV Everywhere solutions offered by their operators; where a positive experience will be invaluable to retention efforts. Finally, the upcoming NFL and College Football season combined with fall programming will likely keep subscribers in place.