Pay TV is alive and well, and now has more subscribers than ever. There was some consternation in the second and third quarters of last year, when the industry reported its first ever declines in the number of pay TV subscribers. But as BTIG analyst Richard Greenfield points out (subscription required), now that all the major public pay TV providers have reported their earnings, the overall state of the industry is looking up.
The following numbers illustrate how the recent ups and downs of the major pay TV providers. But now that things are looking up again, what’s actually changed?
Cable companies are lowering overall churn. Across the board, the number of customers leaving major cable providers has dropped significantly since the second and third quarters. A case in point is Comcast: (s CMCSA) During cable’s second-quarter bloodbath, it lost 275,000 subscribers. But it dropped only 39,000 subs in the most recent quarter. On its first quarter earnings call, Comcast attributed much of that to better customer service and lowering the number of customer complaints it faces. It’s also doing a better job of preparing for and reacting to customer calls when they roll off introductory plans.
The product is getting better. We’ve been skeptics of TV Everywhere and the value it offers to subscribers, but it seems to actually be working. Now that cable subscribers have more options for being able to access cable content they pay for — including on their PCs and mobile devices like the iPad (s aapl) — they might actually stick around rather than using other services. Not just that, but the second generation of TV Everywhere services is much better than the initial services launched about 18 months ago.
The economy is getting (slightly) better. After years spent in an economic downturn, U.S. consumers were crunched by unemployment and stagnant wages. Given the overall state of the economy, the $100/month cable bill looked like a luxury they could no longer afford. But with a turnaround lurching along, some subscribers might be coming come back.
Subscribers who signed up after the digital transition have churned out. Back in 2009, a number of TV watchers who hadn’t previously subscribed to cable signed up after finding the analog signals that fed their local TV broadcasts weren’t working anymore. A year later — around the second and third quarters — many likely unsubscribed from pay TV services once their 12-month introductory deals expired. Now that group has been churned off, and cable providers are signing up less fickle subscribers.
Netflix really is a complement, and not a competitor, to cable. The most interesting thing about the bounce back in cable subscribers is that it has occurred during the two largest quarters for growth in Netflix’s history. Netflix now has 22.8 million subscribers in the U.S. — up from 16.9 million at the end of the third quarter. That suggests users really are choosing to stream Netflix in addition to, not instead of, cable.