US pay-TV subs drop by 348k in Q2

The number of pay-TV subscribers in the US fell by nearly 348,000 between April and June of this year, according to research firm IHS iSuppli, which attributes the drop to weakening economic conditions and stronger competition from over-the-top (OTT) players like Netflix.

The research firm estimates that there were 100.9mn pay-TV subscribers in the US by the end of the second quarter of this year, down 348,000 from three months earlier – slightly more than the 340,000 customers which cut the cord in the same period of 2011.

“Poor economic conditions played a role in declining subscriber additions for pay-TV operators in the second quarter,” said Erik Brannon, analyst for US television at IHS. “Another challenge was in the competitive threat posed by OTT services, such as Netflix. Consumers are spending an increasing amount of time using Netflix at the expense of traditional services like cable and satellite, which may lessen the incentive to retain a pay-TV subscription.”

Cable TV operators were hardest hit in the period, losing around 600,000 subscribers in total and continuing a trend for cable which has seen its subscribers decrease in number during each of the last consecutive 21 quarters.

Satellite operators also suffered in the period, losing 62,000 subscribers in total, due mostly to DirecTV’s loss of 52,000 subscribers – its first-ever decline. IHS iSuppli believes that, while far less precipitous, satellite’s decline is more significant than cable’s, as it marks the first contraction since the second quarter of 2011.

There was good news for telco TV providers such as AT&T and Verizon, which increased their subscriber tallies in the period by adding 312,000 customers, nearly offsetting the declines suffered by satellite and cable rivals.

“Pay-TV players are betting that by adding extra value for their subscribers – with new offerings like TV Everywhere, faster Internet speeds and deep discounting promotions – they can stem the tide of subscribers defecting to OTT, and entice new ones to join,” Brannon said.

“Still, while OTT presents a challenge to pay-TV, the magnitude of the threat is largely overblown. Pay-TV losses in the second quarter of 2012 were only slightly worse than the second quarter of 2011, largely due to seasonality, and also the economy.”

Ultimately IHS believes that the number of pay-TV video subscribers generally will remain flat to slightly negative through the remainder of 2012, lasting through 2016 and beyond.

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