Pay-TV Providers Raising Subscription Rates: Analyst

Cable, satellite and phone companies are all raising rates for television services this year, even as some chase penny-pinching households with new, lower-priced basic packages.

Dish Network is seeking the greatest increases, raising subscriptions on average by 11%, according to research firm Sandford Bernstein (via Variety). But the satellite service provider counters that its basic package is still priced much lower than cable rival.

Bernstein analyst Craig Moffet reports that Time Warner Cable will raise rates on average by 7%, while Comcast, DirecTV and AT&T all will hike prices by 4% and Cablevision by 3%.

Pay-TV service providers continue to compete on price for new entry-level subscribers, however. Major cable companies including Comcast and Time Warner Cable have dropped package prices to as low as $29.99/month in select cities, according to The Philadelphia Inquirer.

Continued Volatility Among Pay-TV Services: Research

The overall pay-TV market in the U.S. has contracted for a second consecutive quarter, according to research firm SNL Kagan — leading to new speculation over the presumptive “cord cutting” phenomenon.

The total pay-TV customer base fell by 119,000 customers in the third quarter of 2010, compared to a 346,000 gain reported in third-quarter 2009. During the second quarter, the losses were steeper: 216,000.

SNL Kagan attributes the third-quarter fall-off exclusively to cable service providers, which lost an estimated 741,000 basic video customers during the quarter. The decline is surprising since historically Q3 “tends to produce the largest subscriber gains due to seasonal shifts back to television viewing and subscription packages,” according to the research firm’s Ian Olgeirson.

Telco TV providers added 476,000 customers in the third quarter, while satellite TV companies added 145,000. But as in Q2, the telco and satellite TV providers’ gains don’t fully offset cable’s loss.

Cable and media executives have been adamant that the volatility is due to economic factors: Variety has a roundup of the latest comments. SNL Kagan agreed with the industry’s own assessment over the summer. However, Olgeirson says, “it is becoming increasingly difficult to dismiss the impact of over-the-top substitution on video subscriber performance.”

Economy Pulls Down Pay-TV Subscribers For First Time Ever In Q2

Economic factors such as high unemployment and a weak housing market led to a net loss of some 216,000 pay-TV subscribers in the second quarter, according to SNL Kagan. The aggregate pay-TV subscriber drop compares to a gain of 378,000 subscribers in the second quarter of 2009.

If there is a silver lining for pay-TV providers, at least the losses don’t represent cord-cutting for Internet video sources.

“Although it is tempting to point to over-the-top video as a potential culprit, we believe economic factors such as low housing formation and a high unemployment rate contributed to subscriber declines in the second quarter,” says SNL Kagan Analyst Mariam Rondeli. “We are also seeing churn resulting from the broadcast digital transition, which boosted video uptake early last year, as many have abandoned their paid subscriptions once initial promotional contracts expired.”

Cable operators are responsible for the industry’s net subscriber loss. Some 711,000 cable subscribers ended their service during Q2, and six of the country’s top eight operators reported their steepest quarterly video losses, Kagan says. Providers of satellite and telco video services, meanwhile, managed to add 81,000 and 414,000 subscribers, respectively, during the quarter.

Accordingly, cable’s share of combined video subscribers dropped to 61%, versus 63.6% in the second quarter of 2009. Telcos continue to take market share in the video business, growing from 4.3% in second-quarter 2009 to 6.0% in second-quarter 2010. Although the satellite industry expanded market share over the past year, the gains have been modest at less than 1%.

Full subscriber counts for cable, satellite and telco video services stand at 100.1 million.

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