US Pay TV’s “Toxic Mix” meltdown

For some time now the signs for pay-TV growth have not been good. So-called ‘cord cutters’ who favour NetFlix, YouTube or other OTT suppliers seem to be getting the blame for pay-TV’s decline in subscribers. The Washington Post newspaper headlined the decline to a “toxic mix” of circumstances which have led to a net loss of some 580,000 subs (according to Bloomberg data) during 2Q at the USA’s top six cable and satellite operators. This is the first-ever time that such losses have been experienced – almost – across the board.

Craig Moffett, a highly-regarded industry analyst at Sanford C Berstein told the newspaper that it isn’t solely the OTT content suppliers who are to blame: “Rising prices for pay TV, coupled with growing availability of lower-cost alternatives, add to a toxic mix at a time when disposable income isn’t growing,” Moffett said. “For younger demographics, where in many cohorts unemployment is north of 30 per cent, and especially for those with limited or no interest in sports, the pay-TV equation is almost inarguably getting less attractive.

There’s another factor: The USA’s two telephony giants, AT&T and Verizon, managed to totally buck the above trend and between them ADDED 386,000 new video subscribers. New home sales in the USA have also slumped in May and June adding to the industry’s woes, and the general consensus is that US economy is especially hurting subscribers at low-income levels

But set aside this negative picture are some more optimistic signs. For example, DirecTV added subs in 2Q. Rivals Dish Network, which lost 135,000 subs, will now reposition itself to go after middle and higher income potential subscribers, said CEO Joe Clayton in a conference call earlier this week, and looking in particular for a better class of customer

There may be worse to come, especially through the summer months. Jason Bazinet, an analyst at Citigroup Inc. in New York, in a note to clients, said that pay-TV subscribers have declined in three of the past five quarters. “While second-quarter seasonality likely played a role, some households may have left the pay-TV universe entirely,” he stated.

 

 

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