Sun, Aug 14, 2011 - Page 11 News List

Pay TV industry sees subscriber numbers drop

By Peter Svensson  /  AP, NEW YORK

A pedestrian walks past a television in New York on July 29.

Photo: AFP

The weak economy is hitting Americans where they spend a lot of their free time: in front of the TV set.

They’re canceling or forgoing cable and satellite TV subscriptions in record numbers, according to an analysis by the Associated Press (AP) of the companies’ quarterly earnings reports.

The US subscription TV industry first showed a small net loss of subscribers a year ago. This year, that trickle has turned into a stream. The chief cause appears to be persistently high unemployment and a housing market that has many people living with their parents, reducing the need for a separate cable bill.

However, it’s also possible that people are canceling cable, or never signing up in the first place, because they’re watching cheap Internet video. Such a threat has been hanging over the industry. If that’s the case, viewers can expect more restrictions on online video, as TV companies and Hollywood studios try to make sure that they get paid for what they produce.

In a tally by the AP, eight of the nine largest subscription TV providers in the US lost 195,700 subscribers in the April-to-June quarter.

That’s the first quarterly loss for the group, which serves about 70 percent of households. The loss amounts to 0.2 percent of their 83.2 million video subscribers.

The group includes four of the five biggest cable companies, which have been losing subscribers for years. It also includes phone companies Verizon Communications Inc and AT&T Inc and satellite broadcasters DirecTV Group Inc and Dish Network Corp. These four have been poaching customers from cable, making up for cable-company losses — until now.

The phone companies kept adding subscribers in the second quarter, but Dish lost 135,000. DirecTV gained a small number, so combined, the US satellite broadcasters lost subscribers in the quarter — a first for the industry.

The AP’s tally excludes Cox Communications, the third--largest cable company, and a bevy of smaller cable companies. Cox is privately held and does not disclose subscriber numbers.

Sanford Bernstein analyst Craig Moffett estimates that the subscription-TV industry, including the untallied cable companies, lost 380,000 subscribers in the quarter. That’s about one out of every 300 US households and more than twice the losses in the second quarter of last year. Ian Olgeirson at SNL Kagan puts the number even higher, at 425,000 to 450,000 lost subscribers.

Dish CEO Joe Clayton told analysts on a conference call on Tuesday that the industry is “increasingly saturated.”

However, like other industry executives, Clayton sees renewed growth around the corner. Though his company saw the biggest increase in subscriber flight compared with a year ago, he blamed much of that on a strategic pullback in advertising, which will be reversed before the end of the year.

Other executives gave few indications that the industry has hit a wall. For most of the big companies, the slowdown is slight, hardly noticeable except when looking across all of them. Nor do they believe Internet video is what’s causing people to leave.

Olgeirson said the people canceling subscriptions, or never signing up, are an elusive group, difficult to count. Yet he believes the trend is real and he calls it the “elephant in the room” for the industry.

Anecdotal evidence suggests that young, educated people who are not interested in live programs such as sports are finding it easier to go without cable. Video-streaming sites like netflix.com and hulu.com are helping, as they run many popular TV shows for free, sometimes the day after they air on television.

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