Cable TV is beginning to notice substantial losses in revenue and in customer retention. As web based content providers like YoutTube, Netflix, and Hulu, offer viewers similar or even the same content for far cheaper than what television companies charge.
In the nearing future cable TV companies may no longer be able to compete within the entertainment market.
Publicly traded cable, satellite and phone companies had a combined net loss of about 200,000 subscribers in the quarter, earnings reports showed, about 0.2% of the roughly 100 million pay-TV subscribers. Sanford C. Bernstein estimates the overall industry shed more than 400,000 subscribers during the period when results for closely held operators are included.
A sustained decline in the number of people subscribing to pay TV has ramifications for pay-TV operators and for TV channels, most of which share in the fees paid by subscribers. Big entertainment companies generate much of their profits from subscription fees paid to TV channels.
Chairman Charlie Ergen, of Dish Network Corp, acknowledges that people are switching to cheaper alternatives. He even cites his own children's behavior as proof.
The April-through-June quarter is traditionally a weak period for pay-TV operators, as college students disconnect their service, typically returning in the fall, companies say. Last year, and in 2010, the pay-TV industry made up for declines in the second and third quarters with gains in the first and fourth quarters. Both years posted net growth of about 200,000 subscribers.
Prior to 2010, the pay-TV industry never saw a quarterly subscriber decline. Since then, declines have surfaced in five different quarters, according to Bernstein research, startling an industry that for decades had added customers at a brisk clip. The proportion of households subscribing to pay television increased to about 86% currently, from 61% in 1992, according to the National Cable & Telecommunications Association.
DirecTV has also lost subscribers in the U.S. for the first time in its history. Cable operators are still enjoying growth in their Internet-access broadband business. Time Warner Cable said last week that the number of Internet-only subscribers increased 28% from a year earlier.
DirecTV is leaning more on its fast-growing Latin American arm, as well as higher prices and extras like pay-per-view in the U.S.
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