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Cable takes brunt of customer losses, Pay TV everywhere shudders

The writing is on the wall for both cable and Pay TV everywhere


Published: 11 November, 2010


The writing is on the wall for both cable and Pay TV everywhere. Ignore the amount of profit, profit margins, average revenue per user or subscriber and instead focus on the number of customers from this the latest batch of pay TV results in the US.

US Pay TV results

Cable Comcast 22,937,000 23,212,000 -275,000 $129.75 248,000

TWC 12,551,000 12,706,000 -155,000 $71.62 95,000

Charter 4,652,700 4,716,500 -63,800 $69.10 50,800

Cablevsn 3,043,000 3,067,500 -24,500 $149.04 10,000

Cable Total 43,183,700 43,702,000 -518,300 403,800

DTH DirecTV 18,934,000 18,760,000 174,000 $88.98

Dish 14,289,000 14,318,000 -29,000 $74.36

DTH Total 33,223,000 33,078,000 145,000

IPTV AT&T 2,741,000 2,505,000 236,000 148,000

Hybrid Verizon 3,300,000 3,096,000 204,000 61,000

IPTV Total 6,041,000 5,601,000 440,000 209,000

This picture is key to everything in pay TV. The US is virtually the ONLY saturated pay TV market in the world, everywhere else pay TV is going up, and this provides a picture of what might happen when other countries reach this saturation.

Secondly it is the best case scenario for cable of anywhere in the world, a vibrant, cash rich community which can continue to invest in the best of breed technology on a grand scale. And the truth is that largely the formula is not working. In one single quarter, 1.2% of the cable community has cancelled its subscription to cable TV. It has added the lower ARPU service of 403,800 broadband lines to its mix, but already the telcos are finding rich broadband pickings in their new offerings. Verizon FiOS Internet is growing faster than its internet as a whole with 226,000 new additions more than reversing the losses at its traditional DSL internet. Once Verizon has converted most territories to FiOS it will clearly have just as good broadband adds as the cablecos and that will be an across the board disaster, because those customers got to come from somewhere and the best candidate is cable.

We haven’t covered the telephone lines in this diagram, but across the board the cablecos acquisition of them is slowing and the losses at AT&T and Verizon are slowing. They could easily reach parity there soon, which would make the TV services the main area of contention.

We have only taken the big top four US cable companies and the two major telcos and DTH players, but we expect this time of transition to be going on across the board, but slightly worse, because as we go down to take in smaller cablecos (and smaller telcos) we will find that they are both less able to invest heavily in capex, and their differentiation will be slower to emerge in the first place.

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