Traditional pay-TV continues to suffer in North America, with overall losses being the story for the second quarter of 2013, according to research from SNL Kagan and IHS (News - Alert). The second quarter is always a seasonally soft period, but the results painted a picture of a mature industry and saturated market that conspires against any provider looking to make significant gains in market share.
SNL Kagan estimates that U.S. cable, satellite and telco video providers collectively lost 366,000 video subscriptions in the second quarter—a loss, but a nearly 11 percent improvement to the loss posted in the year-ago quarter.
The combined cable, telco and DBS counts, according to SNL Kagan estimates, were more than 200,000 lower than in second quarter 2012. By expanding the view backward to second quarter 2011, SNL Kagan’s analysis noted only a small uptick in combined subscriptions of 121,000 for the past 24 months.
The verdict? A multichannel market that is languishing in subscriber doldrums.
Image via Shutterstock
Segment-specific results show that cable continues to bleed the most. It doubled its loss from the previous quarter, even if the estimated decline of 607,000 is a slight improvement from the year-ago measure. The industry's basic video tally has dropped by 1.8 million in the trailing 12 months, and cable's share of the combined customers slipped to 55.3 percent.
DISH Network and DirecTV (News - Alert), largely single-play offerings, are meeting resistance above the 34 million subscriber level, illustrated by a drop of 162,000 in the quarter, which marks its single-largest quarterly decline ever.
Nonetheless, the satellite segment is still slightly ahead of its year mark with a small increase over the trailing 12 months.
The telcos, however, offer a lone bright spot. IPTV service from AT&T, Verizon, regional telcos and Google (News - Alert) continued to take video share from the cable and DBS incumbents, despite uneven footprint expansion in the first half of 2013. The telco segment, with more than 400,000 net adds, gained significantly more subscribers than in the year-ago quarter and topped 10.7 million total video customers as of mid-2013.
The rise of IPTV (News - Alert) suggests that next-gen approaches—hybrid offers that wrap in over-the-top (OTT) functionality for instance, as many regional telcos have done—offer consumers an attractive proposition compared to traditional cable and satellite packages. The latter are starting to leverage network DVR functionality (like DISH’s Auto Hopper commercial-skipping functionality) and TV Everywhere to sweeten the pot for consumers, so the Q3 results could show some improvement in customer churn metrics.
Meanwhile, a new TV Intelligence report from information and analytics provider IHS found that life in the Great White North is facing a similar trajectory. Subscriptions to pay-TV in Canada fell by 10,810 in the second quarter of the year. As in the U.S., IPTV was the only segment of the market to achieve growth in the second quarter. Its gains still failed to offset losses in both cable and satellite though.
Meanwhile, it was the third straight quarter of losses for the Canadian pay-TV space, even though the decline during the most recent April to June period was less than during the prior two quarters. The market lost 27,840 customers in the first quarter, and 11,950 in the fourth quarter of 2012.
"For the pay-TV industry in Canada, employment, income and housing starts are the most important factors," said Erik Brannon, analyst for North American television at IHS. Brannon added, "Although there are positive signs in the economy, pay-TV operators in Canada have their work cut out for them to maintain positive video subscriber growth."
Cable lost some 78,900 customers in the second quarter — less than the 86,400 that took place in the first quarter, but widening from the decline of 67,600 during the same time a year ago. There were some notable factors: Shaw Cable sold its Mountain Cable systems serving 40,000 subscribers to rival Rogers Communications. As a result, the transaction boosted subscriber gains for Rogers while widening losses for Shaw. Two other cable players, Videotron (News - Alert) and Cogeco, also posted declines in their subscriber rolls for the period. Overall, it was the seventh straight quarter of negative growth for cable in the country.
Satellite, like cable, also saw losses with 29,300 subscribers leaving, more than the 24,600 lost in the second quarter last year. The majority of losses unfolded at Bell Satellite TV, with competitor Shaw Direct doing a better job at retention given a smaller portion of subscriber decrease during the period.
In contrast to the ongoing challenges of cable and satellite, the IPTV sector enjoyed its ninth straight quarter of growth. With 97,400 new subscribers, the net gains for the latest quarter became the second-highest so far for Canadian IPTV. Bell and Telus continue to make up the bulk of IPTV additions, and will remain the driving force behind Canadian pay-TV, Brannon said.
Even with cable’s woes in the country, Brannon said that the overall Canadian pay-TV business is fundamentally sound, and losses in video subscribers through the years will be nominal. By 2017, total pay-TV subscribers will stand at a projected 11.7 million — just slightly down from the current 11.8 million figure. Going forward, significant a-la-carte offerings by cable operators, coupled with the loosening of bandwidth caps, may provide an impetus for cable to reverse the current negative trends, Brannon noted.
Edited by Alisen Downey