Nearly a quarter of consumers who subscribe to pay TV made changes to their subscriptions over the past year. But that news isn’t as bad as one might expect. According to Parks Associates, of those who made changes to their service, 11% cut or downgraded their packages — but 9% upgraded their subscriptions to include more channels, premium channels or some sort of new technology, like a DVR.
An SNL Kagan report released Thursday shows pay TV services lost a record 625,000 subscribers during the second quarter — the biggest quarterly drop ever. The report underscored fears that cord-cutting is gaining momentum and starting to fray the TV industry’s business model.
Media companies and distributors indicated that more people are cutting the cord and ditching pricey channel packages. Meanwhile, media company executives did damage control, putting a positive spin on the prospect of selling individual channels online.
A testament to the rise in cord cutting, pay TV dropped a net number of subscribers in the first quarter of 2015 for the first time ever, contracting at a 0.5% annual rate, with a net loss of 31,000 customers in the first quarter. Traditional subscription TV providers face an array of Internet competitors, ranging from Netflix and Hulu to YouTube and other digital video sites, that are discouraging consumers from signing up for cable or satellite TV or prompting them to cancel service.
Will the availability of over-the-top services, which deliver pay TV content directly to subscribers rather than forcing them to sign up for cable or satellite, result in fewer cable and satellite subscriptions? That’s been the big question ever since HBO became the biggest network to launch an OTT service earlier this month. Brett Sappington, director of research at Parks Associates, talks about the impact of OTT services, how they will impact pay TV and what the future of OTT services will be.
The pay TV industry contracted in the third quarter at a faster pace than a year earlier, signaling that “cord cutting” is accelerating as more consumers drop cable and satellite-TV connections. The pay-TV industry lost about 179,000 TV customers, a steeper loss from the decline of 83,000 in the year-earlier quarter, according to public company reports and estimates from Wall Street research firm MoffettNathanson LLC.
As Internet-video options proliferate, consumers will have a growing list of reasons to stop paying $90 or more per month for multichannel television. And the jockeying is now under way among programmers and distributors to prep the life rafts if viewers decide to jump en masse.
Legislation passed today by the House Judiciary Committee lacks pay TV-backed retransmission consent reforms. The committee’s vote means that the legislation at issue — which would reauthorize the Satellite Television Extension and Localism Act, or STELA — has now gotten the nod of three of the key congressional committees with a say on the legislation.
Fred Campbell, executive director of the Center for Boundless Innovation in Technology: “Pay-TV providers want to have it both ways. They want the ability to blackout channels they don’t think they need while asking Congress to prevent broadcasters from withholding their programming when video providers refuse to pay. Enhancing the power of pay-TV providers over programming in this way might improve their bottom line, but it wouldn’t benefit consumers. Congress should just say no.”
The Wall Street Journal is reporting that Amazon has approached big entertainment companies about licensing their television channels for a possible new online pay TV service. WSJ subscribers can read the full story here.
Executives linked with Fox, CBS and Univision have suggested the networks could move to pay TV distribution should Aereo be allowed to operate without paying retransmission consent fees. Pressed on the matter this week, Comcast CFO Michael Angelakis held back on whether NBC would consider a similar route.
While the housing market added half a million new units in the fourth quarter, pay TV providers — including cable, satellite and telecom companies — added just 51,000 customers in the same period, according to research firm SNL Kagan. What’s more, pay TV actually lost a total of 5,000 users in the other three quarters, meaning it added a measly 46,000 customers last year, for a combined total of 100.4 million subscribers.
Think of all the challenges that loomed over the pay TV business as far back as late 2011. Cord-cutting? That continues to be more of a rounding error than a phenomenon. Apple TV? Still waiting on Steve Jobs’ brainchild to come to market. Other so-called over-the-top alternatives rumored to be brewing everywhere from Intel to Facebook? Nary a peep.