Monday, May 11, 2015, 10:03 AM ET|Posted by Will Richmond
U.S. pay-TV operators lost 31K video subscribers in Q1 '15, compared to a gain of 271K in Q1 '14, according to analysts MoffettNathanson. The loss was the first time the industry has ever lost subscribers in a first quarter, and signals an acceleration of cord-cutting (or cord-nevering, since it's hard to pull the two apart), contributing to a .5% industry contraction over the past 4 quarters (461K subscribers).
MoffettNathanson has always tried to put pay-TV results in context with both occupied housing net additions and new household net additions. In Q1, the former declined by 407K, but the latter increased by 1.3 million, suggesting around 900K households were added in the U.S. Despite the gain the industry still lost subscribers.
The worst performer was Dish Network, which lost 134K subscribers in Q1 '15 vs. a gain of 40K in Q1 '14. Dish attributed the swing to blackouts resulting from programming contracts expiring, more aggressive promotion by competitors and a weak economy. AT&T followed, dropping to a 50K subscriber gain in Q1 '15, down from a 201K subscriber gain in Q1 '14.
Verizon, the other big telco in the market, improved its results, gaining 90K subscribers in Q1 '15 vs. a gain of 57K in Q1 '14. Verizon is currently embroiled in litigation with ESPN over its "Custom TV" plan, which puts ESPN and other national sports TV networks on a standalone sports tier. Meanwhile DirecTV, the other big satellite operator, also improved its results, adding 60K subscribers vs. 12K a year ago.
Among cable TV operators, only Time Warner Cable improved vs. a year ago, adding 33K in '15, vs. losing 34K in '14. Comcast swung the most, from a 24K gain in Q1 '14 to an 8K loss in Q1 '15. The loss came despite the ongoing rollout of its X1 set-top box, with more innovations coming.
Much has been written about the decline in TV networks' linear ratings since mid-2014, but until now the pay-TV industry has generally held up pretty well, losing just 220K subscribers total in 2013 and 2014. But with non-pay-TV video choices for consumers better than ever, and pay-TV rates continuing to escalate, it was only a matter of time until cord-cutting/cord-nevering increased.
And as MoffettNathanson notes, Q1 results didn't reflect the full impact of HBO Now, Sling TV and Sony Vue, which launched late in the quarter or in Q2. As I've asserted in the past, HBO Now in particular looks like a critical cord-cutting/cord-nevering catalyst, despite HBO executives' statements that so far HBO Now is all additive.
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