Multichannel pay TV sees first decline in subscribers

September 2, 2010

With the Internet threatening to become the primary provider of television to a highly mobile younger national audience, a research firm has reported the first-ever subscriber decline across the U.S. TV multichannel industry.

In a recent report, industry research firm SNL Kagen reported the worst combined subscriber growth of cable, satellite TV and telecom video providers since it started tracking data in the 1980s. The data suggests that American viewers are now increasingly canceling their pay TV subscriptions in favor of Internet-based television services.

Cable lost 711,000 video subscribers in the second quarter, as six of the eight largest cable operators reported their worst three-month period. Overall, cable, satellite TV and telecom providers shed 216,000 video customers in the second quarter compared with a 378,000 gain in the same period a year earlier.

The research firm estimated that almost 3 million U.S. households would use Web television services, such as Hulu, Apple iTunes and Netflix, as their primary video provider by the end of the year. That’s up from 1.5 million viewers in 2009. For 2011, the company expects the figure to hit 4.3 million.

The second quarter is always the weakest for TV providers, but the report also highlighted economic factors — such as high unemployment and the weak housing market — as well as the one-time effect of cancellations by those who had signed up for a TV service a year earlier amid deep discounts tied to the nation’s digital TV transition.

The perfect storm of a continuing poor economy along with new technology that allows consumers to reduce a bill that exceeds $100 a month is an attractive one. It has caused a frenzy of activity on the Internet television front, including Yahoo’s interest in purchasing a major stake in Hulu, the online television service.

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