Pay TV operators haven’t had such a good quarter so far. With most of the major public cable, satellite and IPTV providers announcing earnings, it’s clear that the second quarter was a weak one in terms of net subscriber additions. On Wednesday, Comcast (s CMCSA) announced it lost 238,000 video subscribers. Thursday, DirecTV reported net additions of just 26,000 video subs, which is its lowest number of additions ever. For many, a weak second quarter will cause many to once again question whether the growth of online video services, combined with a tough economy, is leading more subscribers to decide not to pay for cable.
|Company||2Q Video Net Adds/Losses|
|Time Warner Cable||-130,000|
The chart so far looks very similar to the results of last year’s second quarter, which was the first down quarter in the pay TV market’s history. SNL Kagan reported that the pay TV industry lost 216,000 total subscribers in that quarter, with cable companies losing most of the pay TV subscriber base and satellite and IPTV providers unable to make up the difference.
Some caveats: Two major public pay TV operators — Cablevision (s CVC) and Dish Network (s DISH) — have yet to report their earnings, so this chart could look slightly different next week once we see how many subscribers they’ve gained or lost. It’s possible that Dish net adds could push the number positive. At the same time, there are a number of smaller, Tier 2 and Tier 3 cable operators that don’t publicly report their numbers. So we probably won’t actually know for sure if the industry lost subscribers again until later on in the month, when SNL Kagan updates its quarterly report.
Also, operators like to remind us that the second quarter is historically a very weak quarter for cable companies, as most networks take the summer off and play mostly reruns — and who wants to pay for that? But SNL Kagan already reported declines in pay TV subscribers throughout the top 15 DMAs in the U.S. in the first quarter. And a seasonally weak second quarter, combined with a down economy and rising cable programming and equipment rates, will likely lead to lower subscriber numbers when the final numbers come out.
With that, the question of how online video services affect customer willingness to pay for a cable subscription will also likely re-emerge. Most pay TV operators have held fast, saying they’re seeing no real effect from the emergence of services like Netflix (s NFLX) or Hulu. And even Netflix has focused on what it calls the trend of “cord mending,” trying to downplay the threat that it might be to the broader TV industry.
That said, it’s clear there is some cause for concern within the industry, specifically as broadcasters begin thinking about adding TV Everywhere-type authentication to their online video services. Fox announced last month that it will soon require pay TV subscribers to log in to view its shows the day after they air; viewers who aren’t cable subscribers (or who don’t subscribe to partnered distributors) will have to wait 8 days to watch its broadcast shows online.
When the plan was announced, Fox affiliate sales chief Mike Hopkins said that concern about cord cutting was one reason the broadcaster decided to implement TV Everywhere-type authentication. It’s still an open question, however, whether restricting access to its content will act as an incentive to keep viewers subscribing to cable, or if it will ultimately drive them to piracy.