More Video Losses Coming as Cable Operators Report Q4 Results
Analysts expect cable operators to tell of further video subscriber losses when they report Q4 financial results in coming weeks. The lagging economy, a nearly saturated pay-TV market and the lack of new housing construction have limited the overall size of the pay-TV market, and cable operators are continuing to lose share to DBS and telecom competitors, they said. “What we're seeing are pretty much flat results for the industry as a whole,” said Bruce Leichtman, president of Leichtman Research Group. “We're talking about essentially 90 percent of people having some form of multichannel video service."
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Over the next 12-18 months, phone companies will probably take some more customers from the incumbent cable operators, said Miller Tabak analyst David Joyce. “Other than that it’s going to be a marketing game, going back and forth between the established players.” Evidence of that trend is already found in early Q4 results. Time Warner Cable reported a loss of about 141,000 video subscribers. AT&T’s U-verse added 236,000 and Verizon’s FiOS added 182,000. Those companies will pose cable operators less of a threat down the road, Joyce said. “Verizon is not increasing its footprint any more. AT&T still is, but they're slowing."
Pay-TV subscriber losses shouldn’t be interpreted as evidence that customers are ditching their service entirely and opting for online video services, analysts at Nomura wrote investors. They blamed the 2009 DTV switchover and the drop in new housing formation for video subscriber declines in 2010. “We continue to believe that cord-cutting is an overstated risk to the TV industry,” they said, predicting the broader pay-TV industry added about 130,000 subscribers in Q4.
Q4 subscriber losses are nothing new for cable operators, Leichtman said. In Q4 2008, the top 10 cable operators lost about 439,000 video customers and in 2009 that number was 450,000, he said. This year Leichtman estimates they'll lose 550,000-575,000. “The trending that generally occurs between the quarters kind of tells us that this quarter will probably be pretty similar to the third quarter” of 2010,” he said. “And then the first quarter picks up.” With cable penetration at about 46 percent for those top 10 operators, cable companies need to increasingly focus on what types of customers they attract, he said. “It’s no longer about everybody,” he said. “Now for the cable operators it’s ‘who are you trying to get?'”