Cord-Cutting Accelerates as Pay TV Sees Record Subscriber Losses

Cord-cutting is gaining steam.

Pay-TV services recorded their biggest-ever quarterly drop in subscribers, losing 625,000 TV customers, according to a report Thursday from the research firm SNL Kagan.

While about 100.4 million households still pay for traditional pay TV, the report underscored investors’ fears that cord-cutting is gaining momentum and starting to fray the TV industry’s business model.

Those fears led to a sell-off in media stocks last week, with entertainment companies losing more than $60 billion in value over two days. Top program suppliers such as Walt Disney Co., Time Warner Inc. and Viacom Inc., which rely on subscriber fees and advertising for their revenue, were hard hit.

So-called cord cutters are dropping pay-TV packages that cost an average $87 a month in favor of online services from Netflix Inc. and Amazon.com Inc. priced at under $10. That’s led to falling viewership at many cable networks, hurting ad sales and threatening to reduce subscriber fees.

Comcast Corp., Dish Network Corp. and other conventional pay-TV distributors are trying to keep customers by offering discounted packages that have fewer channels and Internet access for online viewers.

At a media conference Thursday, Time Warner Chief Financial Officer Howard Averill said subscriber losses at the company’s Turner channels “have been a bit more than we expected,” but he didn’t predict cord-cutting would accelerate.

About 85 percent of the revenue from Time Warner’s Turner division comes from four channels -- TNT, TBS, CNN and Cartoon Network. That puts the company in a good position, he said, as “skinny” TV bundles become more popular and Turner’s biggest channels are included in them.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE