Pay TV industry loses record number of subscribers

August 12, 2011

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

They’re canceling cable and satellite TV subscriptions in record numbers, according to an Associated Press analysis of the companies’ quarterly earnings.

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 high unemployment and a housing market 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 in favor of inexpensive Internet video. That’s a threat that has been hanging over the industry. And if that’s happening, viewers can expect more restrictions on online video as TV companies and Hollywood studios try to make sure they get paid for what they produce.

In the tally, eight of the nine largest U.S. subscription-TV providers lost 195,700 subscribers in the April-to-June quarter. That’s the first quarterly loss for the group, which serves 70 percent of households. 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 Verizon Communications and AT&T and satellite broadcasters DirecTV Group 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 DirecTV and Dish combined lost subscribers, a first for the U.S. satellite TV industry.

The 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.

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 them drop cable because the sites 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.

Sanford Bernstein analyst Craig Moffett says it’s hard to separate the effect of the economy from that of Internet video. Subscription-TV providers keep raising rates because content providers — including Hollywood studios and sports leagues — demand ever higher prices. That’s causing a collision with the economic realities of American households.

Associated Press

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