Cut the Cable: US Pay TV Industry Faces Record Number of Cancellations

August 10, 2011Sectorby EW News Desk Team

0

American consumers are cancelling or forgoing their cable and satellite TV subscriptions in record numbers, as fears continue to mount over the nation’s economic situation.

In a study conducted by the Associated Press, eight of the nine largest subscription-TV providers in the US lost 195,700 subscribers during the April-to-June quarter of 2011.

According to Sanford Bernstein analyst Craig Moffett, the total subscription losses for the entire subscription-TV industry, including the untallied cable companies, is likely to be around 380,000 subscribers. Putting it into perspective, that would mean that nearly one in every 300 US households cancelled their subscriptions during a 3-month period. Ian Olgeirson at SNL Kagan places the number even higher, estimating it to be around 425,000 to 450,000 cancellations.

The US subscription-TV industry first showed a small net loss of subscribers a year ago. However, the number has risen exponentially this year with a weakened economic climate. According to AP, the chief cause for the rise in cancellations this year “appears to be persistently high unemployment and a housing market that has many people living with their parents, reducing the need for a separate cable bill.”

Many viewers have also turned to Internet video broadcasts, which can be significantly cheaper and more targeted towards their individual tastes.

Video-streaming sites like Netflix.com and Hulu.com for example, run many popular TV shows for free, sometimes the day after they air on television.

A report by The Nielsen Company in June also found that Americans who watch more online videos tend to spend less time on their television sets. The ratings agency said it started noticing that a segment of consumers were starting to make a trade-off between online video and regular TV since last fall. The activity was more pronounced among people ages 18-34.

However, some cable companies are sceptical on the effect of the Internet on its subscribers. Glenn Britt, CEO of Time Warner Cable Inc., told AP that the effect of Internet video on the number of cable subscribers was "very, very modest.”

Others such as the Fox Broadcasting Company have started to charge online consumers more for immediate content. Fox is delaying reruns on Hulu by a week unless the viewer pays a $8-a-month subscription for Hulu Plus or subscribes to Dish's satellite TV service.

But, the truth is that the rising cost of cable or satellite TV simply does not go hand in hand with the economic realities of American households.

"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," said Moffett.

Read the Full Report from the Associated Press