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Tougher economic times, Internet options nick pay TV industry for first time

Cable TV providers reported their first-ever quarterly loss of paying customers nationwide, a telling sign that the struggling economy is driving more households to cut their cable cords and find cheaper or free TV offerings to watch using the Internet.

I wondered earlier this week about cable subscriber trends when I watched some thrifty 20-somethings cozy around a laptop to watch a recent HBO series called Game of Thrones based on fantasy novels by George R.R. Martin. These young adults — college students on limited means — needed neither cable TV nor premium HBO subscriptions to enjoy the series.

With the country dangerously close to slipping back into a recession, it's a simple enough equation:

Tough economy + Internet alternatives = growing pressures on pricey cable TV subscriptions.

This week, the Associated Press reports that it tallied up lost subscribers from a majority of the top nine pay TV providers, including Comcast and Time Warner Cable, Verizon, AT&T, DirecTV and Dish Network. Privately owned cable giant Cox Communications does not disclose its numbers. Similarly here in the Tampa Bay area, cable TV provider Bright House Networks is private and does not share specifics. (See box for details.)

But the AP survey, which captured 70 percent of households, found that the eight providers lost a combined 195,000 subscribers. One bad quarter hardly makes a trend. Yet. It's just 0.2 percent of their 83.2 million subscribers. But analysts at Sanford Bernstein and SNL Kagan estimate bigger numbers of lost subscribers, anywhere from 380,000 to 450,000, when all pay TV providers are included.

Based on the feedback from some major cable TV providers in the Tampa Bay area, subscriptions to pay TV continue to increase, even though no specific numbers were provided. Verizon, one of the rare pay TV providers to report a nationwide gain in subscribers in the second quarter, said it is still adding TV customers here. So did Bright House Networks. Knology, another provider whose markets include Pinellas County, says it lost 729 customers across all its service territories in the quarter, a better performance than the 4,946 lost in the same quarter of 2010.

Tampa Bay's Bright House and Verizon spokesmen, Joe Durkin and Bob Elek, who love to spar over whose service is better, both offer this pitch: Pay TV offers relatively cheap at-home entertainment, with increasing flexibility to watch shows when you want, compared to the cost of going to the movies or some other ticketed event.

A basic Verizon FiOS TV package costs an initial $65 per month, plus tax and fees (which add up). Bright House's website does not specify a TV-only price (call for a quote, Durkin says). But the company charges $85 per month (plus tax and fees) for TV and home phone service. Both companies offer Internet access for an additional fee.

Most customers buy a bundle of services.

The trick is, pay TV by now is a pretty saturated market. For the moment, the Internet offers free or cheap TV- and movie-watching alternatives like Netflix or Hulu that are drawing young adults. In time, they may make more entertainment sense even to gray-hairs like myself.

Robert Trigaux can be reached at trigaux@sptimes.com.

.Fast facts

Second-quarter subscriber stats*

Gained subscribers

DirecTV Inc.:

Gained 26,000.

Verizon Communications Inc.:

Gained 184,000.

AT&T Inc.:

Gained 202,000.

Lost subscribers

Comcast Corp.:

Lost 238,000.

Dish Network Corp.: Lost 135,000.

Time Warner Cable Inc.: Lost 128,000.

Charter Communications Inc.: Lost 83,700.

Cablevision Systems Corp.: Lost 23,000.

Knology**: Lost 729.

* Bright House Networks is privately held and does not disclose numbers.

** With acquisitions, Knology gained 19,822 in the quarter.

Sources: AP, companies

Tougher economic times, Internet options nick pay TV industry for first time 08/10/11 [Last modified: Wednesday, August 10, 2011 10:24pm]
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