[Satellite News 08-24-10] While the U.S. paid TV industry, as a whole, lost 216,000 customers in the second quarter of 2010, satellite providers DirecTV and Dish Network added about 81,000 new paid TV subscribers, joining phone and IPTV companies Verizon Communications and AT&T as the only broadcast telecommunications industries to see growth during the period, according to a report released Aug. 24 by research firm SNL Kagan.
    The weak U.S. consumer economy, combined with the expiration of cable broadcast packages offered after 2009’s digital TV conversion, resulted in satellite’s cable competitors taking some of the worst subscriber losses in their company’s history. Six of the eight largest U.S. cable operators reported substantial quarterly video subscriber losses, with a total of 711,000 cable subscribers cancelling in the quarter, the worst churn rate in the cable industry’s history, according to the report.
    SNL Kagan analyst Mariam Rondeli said that the economy is the main factor in the subscription decline. “Although it is tempting to point to over-the-top video as a potential culprit, we believe economic factors such as low housing formation and a high unemployment rate contributed to subscriber declines in the second quarter. We are also seeing churn resulting from the broadcast digital transition, which boosted video uptake early last year, as many have abandoned their paid subscriptions once initial promotional contracts expired.”
    However, the firm expects to see continued declines for the cable industry and said that paid TV businesses should adjust business models to accommodate on the consumer trend toward Internet-delivered content. “We estimate that almost 3 million U.S. households will use Hulu and other Web TV options as their primary video solution by the end of the year, up from 1.5 million in 2009. For 2011, that figure should hit 4.3 million,” the report said.
    Some satellite companies are already ahead of the Internet trend. On Aug 24, U.S. satellite pay-TV operator Dish Network introduced its online video portal that will integrate live and recorded TV and offer 150,000 movies and TV shows.
    Through DishOnline.com, Dish Network customers will be able to watch streaming video contract and browse for content by title, network, actor or genre through a search engine. The streaming video service requires a ViP 922 SlingLoaded DVR or the upcoming Sling Adapter. DishOnline.com will list episodes recorded to a customer’s DVR, as well as upcoming episodes that customers can record. The Web portal also will be open to non-Dish Network customers.
    “DishOnline.com integrates Dish Network’s expansive TV programming lineup with the vast amount of online video content, adding another dimension to our ‘pay once, take your TV everywhere’ product platform,” Dish Network Senior Vice President of Programming Dave Shull said in a statement.
    While the second quarter is always the weakest for TV providers, Sanford C. Bernstein analyst Craig Moffet predicts that multichannel TV operators will grow subscribers for the full year despite the second-quarter weakness. "Now, if we were to see weakness persist through the fourth quarter, then Houston, we’d have a problem," he said.
    Satellite pay-TV companies, unlike their traditional cable rivals and major network affiliates, have been discussing new content strategies for years, pointing to recent Nielsen studies that show major network audiences getting older and alternative video content sources booming among the 18-36 demographic.
    Netflix, one of the leading sources for video content among younger audiences, recently acquired rights to movies from the channel Epix, which is three studios: Paramount, Lions Gate, and MGM. The deal, reported to be worth more than $1 billion for five years, will allow Netflix to stream movies from the Epix library to its 15 million subscribers.
    As to why U.S. satellite pay-TV companies have survived, and even thrived, during cable’s worst quarter – analysts can’t say at this time. Some point to sports programming. Earlier this month, DirecTV posted a second-quarter net gain of 100,000 U.S. subscribers after DirecTV matched its competitors’ offer to waive extra fees for HDTV programming. DirecTV also launched its ad campaign for its NFL pro football package, NFL Sunday Ticket, investing $100 million into the offer’s success.
    In a statement, DirecTV said the move is the biggest push it has put behind Sunday Ticket since it began offering the service in 1994, for which it currently has about two million subscribers. DirecTV also signed a new four-year deal with the National Football League last year worth $1 billion annually.