SNL Kagan is reporting that the number of pay TV subscribers in the U.S. has fallen for the second straight quarter, the first time that's happened since Kagan first started tracking the industry in 1980. Cable operators lost 741,000 cable-only subscribers, the largest quarterly loss for cable ever measured by SNL Kagan, while IPTV operators (primarily Verizon and AT&T) gained 476,000 subscribers. Together, satellite operators Dish and DirecTV gained 145,000 subscribers for the quarter. The net loss for all subscription television services was 119,000 subscribers.
Multichannel News points out one of the big reasons for cable's decline: When analog over-the-air broadcasts were phased out in the U.S., cable operators in particular offered very enticing offers to over-the-air households to get them to adopt cable. Those deals are expiring or have already expired, and former over-the-air television viewers are facing big increases in their cable rates. In addition, the price difference between the "basic cable" tier, which is closest to conventional over-the-air TV, and even the cheapest premium tier can be substantial. Multichannel News gives the example of a Comcast cable system that goes from $13.65/month for "lifeline" service to $62.60/month for its "Digital Starter" service.
IPTV and satellite operators have targeted price-sensitive cable subscribers with low-cost service and, in the case of IPTV, triple-play (video, high-speed Internet and telephone) packages priced below the "magic" $99/month number. That explains the gains by IPTV and satellite providers, but it doesn't explain the whole picture. Television Broadcast quotes SNL Kagan senior analyst Ian Olgeirson: "... it is becoming increasingly difficult to dismiss the impact of over-the-top [Internet] substitution on video subscriber performance, particularly after seeing declines during the period of the year that tends to produce the largest subscriber gains due to seasonal shifts back to television viewing and subscription packages."
Economic conditions may be driving the changes, but the changes are real, and they may not be temporary. Unless cable operators get a lot more competitive in how they price and package their services, they're going to be increasingly vulnerable to IPTV and satellite providers, as well as over-the-top Internet video.