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Cable Technology Feature Article

September 02, 2010

Multichannel Video Trend Has Not Broken, Analyst Says

By Gary Kim, Contributing Editor

There has been no break in the growth trend line for multichannel video subscriptions, says Michael Turk, a political and communications consultant. He chalks up the second quarter decline of 711,000 total industry subscribers as an artifact of "artificially" higher sign-ups as the broadcast digital TV transition occurred, a process that lead to higher-than-typical signups, followed by slower demand in the aftermath, but well within the historical growth profile. 

The digital TV transition a year ago caused cable operators to offer temporary subscription discounts as a way of luring formerly-resistant consumers. It is possible that the expiration of deeply-discounted offers has led some customers to churn off.

More likely, the temporary offers had similar effects as auto and housing credits recently have had: demand was simply pushed forward, leading to a decline of growth rates in subsequent quarters as the promotions expired. 

If one subtracts out those who dropped cable when their discount expired, cable actually netted about 100,000 new subscribers in the second quarter of 2010. 

There isn't nearly as much video "cord cutting" going on as sometimes is suggested, he says. 

Also, in the third quarter of last year, cable subs actually began to outpace the construction of new housing units. That suggests higher demand, not lower demand, he maintains. 

Surprisingly, the new users are disproportionately younger users, the very demographic that is supposed to be turning away from buying multichannel video services. It might be too early to say that multichannel video services have reached an inflection point where growth stops.  

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Beecher Tuttle