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Cable Technology Feature Article

March 24, 2014

U.S. Pay-TV Sees Its First-Ever Overall Subscriber Loss in 2013

By Tara Seals, TMCnet Contributor

Get ready for cord-cutting talks to start up again: The U.S. pay-TV industry marked a dubious milestone in 2013: it posted its first-ever full-year decline in subscriptions, according to SNL Kagan.

The firm’s analysis of cable, satellite and telco offerings at the end of 2013 showed that while seasonally driven quarterly declines have become routine for industry watchers, the annual dip illustrates longer-term downward pressure even as economic conditions gradually improve.

According to the tally for the trio of platforms, service providers collectively shed 251,000 in 2013, dipping to approximately 100 million combined subs. The industry added 40,000 video subscriptions in the fourth quarter, slightly weaker on a year-over-year basis and not enough to offset the broader downward momentum.

However, the fourth-quarter subscription bump did not carry enough magnitude to lift the penetration rates sequentially, according to SNL Kagan analysis. Housing formation was modest but still outpaced new subscriptions. The SNL Kagan approach that combines the U.S. Census Bureau categories of temporarily occupied and occasional use housing units produces a sequential net gain of 197,000 occupied units to nearly 115 million at year-end.

Losses from cable providers fueled the overall declines, but the estimated figures for the industry did show some improvement in the fourth quarter on both sequential and year-over-year comparisons. SNL Kagan estimates cable operators lost nearly 2 million video subscriptions for the full year and 388,000 in the fourth quarter to finish 2013 with fewer than 54.4 million basic subs.

Satellite growth slowed in the fourth quarter as both DISH Network and DirecTV (News - Alert) focused on high-value customers. Despite the headwinds, DISH and DirecTV controlled churn and produced net subscriber gains for the year, forestalling an annual decline for perhaps another year. The segment gained 101,000 subscribers in the fourth quarter, contributing to a year-end gain of 170,000 subscribers. Nearly all of the annual gain was contributed by DirecTV. Despite the loss of 162,000 subscribers in second quarter 2013, the DBS segment ended at 34.3 million subscribers.

The telco IPTV segment finished the year strong, led by AT&T's U-verse. The combined multichannel video subscribers served by Verizon FiOS (News - Alert) and AT&T Inc. U-verse reached 10.7 million at the end of the fourth quarter, behind net adds of 286,000. CenturyLink’s PrismTV gained 9,000 subscribers to end at 175,000 customers, and Consolidated Communications (News - Alert) Holdings's IPTV product added 1,000 customers to end the year with 110,000.

The figures echo previous research from Leichtman Research Group, which found that the cable sector is responsible for most of that fall-off: the top nine cable companies lost about 1.74 million video subscribers in 2013 -- compared to a loss of about 1.41 million subscribers in 2012.

"2013 was the first year for multichannel video industry losses, but the modest losses represent only about 0.1 percent of all subscribers," said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. "While the overall market remains fairly flat, further share-shifting has taken place. Cable providers now have a 52 percent share of the top multichannel video subscribers in the U.S., compared to a 58 percent share three years ago."

The No. 1 and No. 2 cable MSOs in the market—which have plans to merge under a proposed $45 billion deal—saw the most losses. Comcast (News - Alert) and Time Warner Cable lost a combined 1.1 million video subscribers. Comcast finished 2013 with 21.7 million on the rolls, down 305,000 according to Leichtman (That’s a slight improvement over the loss of 336,000 in 2012). It did actually manage to gain 43,000 subscribers in the fourth quarter, after 26 consecutive quarters of subscriber losses.

Edited by Stefania Viscusi

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