Pay TV industry loses record number of subscribers

Aug 10, 2011 By PETER SVENSSON , AP Technology Writer
In this July 30, 2008 file photo illustration, a silhouetted coaxial cable is displayed in Philadelphia. The weak economy is hitting Americans where they spend a lot of their free time: at the TV set. (AP Photo/Matt Rourke)

(AP) -- The weak economy is hitting Americans where they spend a lot of their free time: at the TV set.

They're canceling or forgoing cable and satellite TV subscriptions in record numbers, according to an analysis by The Associated Press of the companies' reports.

The U.S. 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 and a that has many people living with their parents, reducing the need for a separate cable bill.

But 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 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 U.S. lost 195,700 subscribers in the April-to-June quarter.

That's the first for the group, which serves about 70 percent of . 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 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 U.S. 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 U.S. 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.

The second quarter is always the year's worst for cable and satellite companies, as students cancel service at the end of the spring semester. Last year, growth came back in the fourth quarter. But looking back over the past 12 months, the industry is still down, by Moffett's estimate. That's also a first.

The subscription-TV industry is no longer buoyed by its first flush of growth, so the people who cancel because they're unemployed are outweighing the very small number of newcomers who've never had cable or satellite before. Dish CEO Joe Clayton told analysts on a conference call Tuesday that the industry is "increasingly saturated."

But 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.

Glenn Britt, the CEO of Time Warner Cable Inc. said the effect of Internet video on the number of cable subscribers is "very, very modest;" in fact, so small that it's hard to measure.

SNL Kagan's Olgeirson said the people canceling subscriptions behind, 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 aren't 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.

In June, The Nielsen Co. said it found that Americans who watch the most video online tend to watch less TV. The ratings agency said it started noticing last fall that a segment of consumers were starting to make a trade-off between online video and regular TV. The activity was more pronounced among people ages 18-34.

Olgeirson expects programmers to keep tightening access to shows and movies online. A few years ago, Olgeirson said, "they threw open the doors," figuring they'd make money from ads accompanying online video besides traditional sources such as the fees they charge to carry their channels. But if looks as if online video might endanger revenue from cable, which is still far larger, they'll pull back.

"Are they really going to jeopardize that? The answer is no," Olgeirson said.

Already, News Corp.'s Fox broadcasting company is delaying reruns on Hulu by a week unless the viewer pays a $8-a-month subscription for Hulu Plus or subscribes to Dish's service. Other subscription-TV providers may join in the future. TV producers and distributors want to discourage people from dropping their subscriptions.

Moffett believes it's hard to separate the effect of the economy from that of Internet video. Subscription-TV providers keep raising rates because content providers such as Hollywood studios and sports leagues demand ever higher prices. That's causing a collision with the economic realities of American households.

"Rising prices for pay TV, coupled with growing availability of lower cost alternatives, add to a toxic mix at a time when disposable income isn't growing," Moffett said.

Explore further: FX says overnight ratings becoming meaningless

4.8 /5 (5 votes)
add to favorites email to friend print save as pdf

Related Stories

Cable TV companies mull impact of online video

Apr 01, 2009

(AP) -- Cable TV operators have treaded gingerly with online video. The companies want to meet consumer demand for watching shows on the Internet. But they don't want cable TV to lose its place as the home's main entertainment ...

US cable TV bleeds subscribers as online grows

Nov 28, 2010

The economic downturn has US cable television companies shedding subscribers in record numbers and Americans increasingly "cutting the cord" in favor of cheaper online options, new research shows.

Time Warner Cable 3Q net income rises

Nov 04, 2010

(AP) -- Time Warner Cable Inc., the country's second-largest cable company, lost more cable-TV subscribers in the latest quarter than it ever has before, keeping the question alive of whether Internet video ...

Recommended for you

Scalping can raise ticket prices

3 hours ago

Scalping gets a bad rap. For years, artists and concert promoters have stigmatized ticket resale as a practice that unfairly hurts their own sales and forces fans to pay exorbitant prices for tickets to sold-out concerts. ...

User comments : 13

Adjust slider to filter visible comments by rank

Display comments: newest first

Techno1
5 / 5 (1) Aug 10, 2011
Unfortunately, the Cable company (owned by Cox) happens to be the best ISP in my area, and they require a television subscription in order to get internet access.

Otherwise, It is perfectly within my expectations that Smartphones and Youtube will eventually make ordinary television obsolete.

I almost never watch it any more anyway, except the Weather Channel or some learning channel. I cannot stand ordinary television programming, particularly the most popular shows, like sitcoms and wrestling, I despise them as they are mostly mindless drivel...which could be a big contributer to the problem, as the quality of the programming has gone down considerably over the years, even as information technology and HD and so on have increased year after year.

Television and movie producers make more and more CRAP programming year after year.
ryggesogn2
3 / 5 (4) Aug 10, 2011
I just noticed FIOS is promoting some program so people can choose their TV package and internet speed.
It is a start. Maybe the Govt/Cable complex will finally respect the wishes of consumers to only pay for what they want.
Techno1
5 / 5 (7) Aug 10, 2011
I'm actually rooting for the Sports networks and leagues to go broke, because of the audacity of the professional atheletes who make so much money to play childrens games...

Peyton Manning recently signed an $18 million per year contract for 5 years.

During the NFL lockout, Chad Ochocinko had the AUDACITY to compare himself to a SLAVE...the asshole makes 7 or 8 million per year, and is one of the wealthiest people alive.

Where was the OUTRAGE from the african american community at the audacity of a rich guy who got rich playing a GAME, comparing himself to a slave?

He's a spoiled rotten BRAT with no real life skills except playing a ball game, and that somehow makes him comparable to a SLAVE?

Get real.

That is absolutely outrageous and offensive, because the sports entertainment is actually what drives a huge portion of the cost of cable television, WHETHER OR NOT YOU ACTUALLY EVEN WATCH THE GAME.

EVERYONE SHOULD BOYCOTT SPORTS ENTERTAINMENT FOREVER...
wiyosaya
not rated yet Aug 10, 2011
Personally, my wife and I also dislike most "common" TV; however, we both feel there are a few gems on TV right now, Castle,The Good Wife, White Collar, Body of Proof, Burn Notice, Covert Affairs, Torchwood, to name a few.

However, I think the industry is doing it to themselves. While Dish Network fights MSG because MSG wants Dish to carry its music video service, they forget that people like me would like an a la carte service for similar reasons. Two faced, IMHO.

As well, DTV in the US should have been fantastic and should have been a virtual death knell for pay TV, however, the outdated 4VSB modulation scheme makes DTV reception worse in my area than analog TV ever was. With DTV, we barely get two local channels that we used to. If OTA tv survives much longer, I will be surprised.

I am all for change, and who knows where the industry will go in the future; however, I personally think that a significant drop in rates would boost subscribership.
epsi00
5 / 5 (1) Aug 10, 2011
I think in the US and Canada, people are gouged when it comes to internet, cable tv and phone services. In France you can have dsl internet, cable tv and phones for around 30 euros and you can long distance for free with your subscription ( not to any country though ). The European companies are not complaining about not making enough money as far as I know. So my answer to all this? get tv off the air and your videos from youtube until such a day as the rates become decent.
Emma_Bradley
not rated yet Aug 10, 2011
Serves the greedy cable companies right.... I cut the cord last year and have been watching TV online with the TVDevo website and Redbox. TVDevo for TV shows and Live TV, and Redbox for movies.
Burnerjack
5 / 5 (4) Aug 10, 2011
It's bad enough to have to pay for mediocre (at best) programming but when they pile on a seemingly endless advertising stream, it has gotten to the point where we're paying for the privledge of watching commecials with occassional content breaks. count me out. I'm done
Roj
not rated yet Aug 11, 2011
it has gotten to the point where we're paying for the privledge of watching commecials with occassional content breaks.
Roger that.
yyz
not rated yet Aug 11, 2011
"In France you can have dsl internet, cable tv and phones for around 30 euros...."

Here in Florida, cable(5Mb/s), TV and phone run ~$110(77 euros). I've heard rates are similarly cheap compared to the US in several Asian countries. US consumers ARE gouged for mediocre service compared to European and Asian markets.
democracy
5 / 5 (1) Aug 14, 2011
We need Gigabit internet for all as a national birthright. Gigabit nationwide internet would be one of the best things the government could do for the public. This would make our nation much more competitive and benefit every citizen. US cable, internet, and cell phone service is lower performance and higher cost than telecom services in other countries. And US cable programming is now one third commercials, with programming that is mostly moronic, including the hype driven spectator sports. All of this damages the USA at every level. People in other countries cannot stand to watch US news programs because it is filled with "millions of commercials" Secretary of State Clinton testified to congress. In Japan 100 megabit internet is common, while in the US cable internet is kept slow and expensive so it will not compete with cable TV for video quality. All these looting sociopath corporate executives need to be terminated.
socean
not rated yet Aug 14, 2011
I want ALL our spectrum back, not just the white spaces. I want it re-allocated to FREE internet for every citizen, everywhere.

Let all the media producers compete in a truly free market.

Let all the service providers e.g. VOIP compete on a level, wireless playing field.

And, while we're retrofitting all our lighting to LEDs, lets use this: http://t.co/4JAVH3g

Our entire country should have ubiquitous, high bandwidth internet, for free. Like everyone has air to breath. That one change alone would re-invigorate our economy to an unimaginable extent. It could also be built and run for chump change compared to TARP.

Vendicar_Decarian
not rated yet Aug 16, 2011
RyggTard... I asked two questions (among many) and you have continued to refuse to answer them.

Here they are again...

---
So you would agree then that children have the same rights as adults. They are part of your "all" category aren't they? Or are rights not universal for all people in contradiction of your Randite ideology?

I take it that you believe - as do all other Libertarian/Randites that laws against drug use, prostitution and so called "victim-less" crimes are also illegitimate and should be abolished?
---

I continue to await your answer.
Vendicar_Decarian
not rated yet Aug 18, 2011
Why is European broadband faster and cheaper? Blame the government

http://www.engadg...overnme/