Pay-TV Suffers Second Straight Subscriber Loss, SNL Kagan Says

Subscription television in the U.S. lost customers for the second straight quarter amid a weak economy and a transition to digital broadcasts on government- controlled spectrum, according to research firm SNL Kagan.

Net subscribers fell by 119,000 in the third quarter, compared with a gain of 346,000 a year earlier, SNL Kagan said in a statement today. Cable-TV operators such as Comcast Corp. led the decline with a loss of 741,000 accounts. Satellite companies, helped by DirecTV, gained 145,000 customers, while telephone companies offering TV service added 476,000.

New video options like Hulu.com and Netflix Inc. online streaming services are proliferating, offering a potentially cheaper alternative to traditional pay-TV. While Comcast and Time Warner Cable Inc., the largest U.S. cable companies, said on their third-quarter earnings conference calls that there is no evidence of so-called cord-cutting, the second straight decline industrywide may alarm investors, SNL Kagan said.

“It is becoming increasingly difficult to dismiss the impact of over-the-top substitution on video subscriber performance,” Ian Olgeirson, senior analyst at Charlottesville, Virginia-based SNL Kagan, said in the statement.

Cable- and satellite-company profits were buoyed in the third quarter by higher monthly bills as existing customers paid more for add-on features including digital-video recorders. Cable companies’ sales were also lifted by adding broadband Internet customers.

Some customers who abandoned their pay-TV subscription were those who rolled off promotional offerings from last year’s digital-broadcast transition, according to SNL Kagan. Dish Network Corp., the second-largest U.S. satellite-television provider, and Comcast were among the companies that used discounts to attract customers during the government-mandated switch from analog service.

The companies said the cost to keep those customers at the lower promotional rates was too great.

To contact the reporter on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net.

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net.

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