[Satellite TODAY Insider 08-16-11] Eight of the nine largest pay-TV providers in the United States lost a combined 195,700 subscribers, or 0.2 percent of the sector’s total 83.2 million subscribers in the 2011 second quarter, due to competition from Internet streaming services, a struggling consumer economy and increasing service rates.

   Throughout the past week following the U.S. pay-TV fiscal report rush, analysts have issued a slew of reports in an attempt to put the region’s subscription slump into perspective. The U.S. satellite pay-TV sector, which is largely comprised of DirecTV and its competitor Dish Network, saw its combined subscriber rate drop compared with the same period in 2010 — a first for the U.S. satellite TV industry.

   Sanford Bernstein Analyst Craig Moffett estimated that the subscription-TV industry, including untallied cable companies, lost 380,000 subscribers in the quarter. “That’s about one out of every 300 U.S. households, and more than twice the losses in the second quarter of last year,” Moffett said in a report issued Aug. 12.

   Last year, Moffett warned satellite pay-TV operators that 2011 could prove to be a difficult year after the 2010 second-quarter produced a slight subscriber dip for some companies, but maintained a small overall gain. “The second quarter is always the year’s worst for cable and satellite companies, as students cancel service at the end of the spring semester,” said Moffet. “Last year, growth came back in the fourth quarter. But looking back over the past 12 months, it’s hard to separate the effect of the economy from that of Internet video. Subscription-TV providers keep raising rates because content providers demand ever-higher prices. That’s causing a collision with the economic realities of American households.”

   SNL Kagan Senior Analyst Ian Olgeirson issued a report that placed the pay-TV sector’s subscriber drop at an even higher number — between 425,000 and 450,000 lost subscribers. Like Moffett, Olgeirson said the chief cause of the decline is pure economics, with high unemployment motivating budget-conscious consumers to eliminate their separated cable bill.

   “Video-streaming sites like Netflix and Hulu are helping consumers drop cable because the sites run many popular TV shows for free, sometimes the day after they air on television,” said Olgeirson. “This has been a looming threat to the industry. While consumers may enjoy this freedom now, they can expect more restrictions on online video as TV companies and Hollywood studios try to make sure they get paid for what they produce.”

   Dish Network CEO Joe Clayton admitted that the U.S. pay-TV industry has become increasingly saturated. “The subscription-TV industry is no longer buoyed by its first flush of growth, so the people who cancel because they’re unemployed are outweighing the very small number of newcomers who’ve never had cable or satellite before,” Clayton said during his company’s 2011 second-quarter conference call.

   While Dish Network acknowledged analysts’ concerns, Clayton said that Dish Network is planning to reposition the company away from marketing to lower-income customers. “We want to rely on our technology and promotions to persuade customers to buy more expensive offerings and increase average revenue per user.”

   Olgeirson said that a growing availability of lower-cost pay-TV alternatives has not helped the market grow during a time when the average household’s disposable income has evaporated.

“The cable companies have been losing for years, but you’re now seeing the satellite companies joining some of that. They are seeing the same kind of effects of being a mature industry,” said Olgeirson. “How do you support your base of customers when you don’t have a bunch of new households to convert? It’s difficult to sustain in a down economic quarter.”