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Report: 13% of Subscribers Canceling or Downsizing Pay-TV Service

31 Jan, 2012 By: Erik Gruenwedel

More than 13% of pay-TV subscribers will cancel or downsize their monthly bills in favor of lower-cost video entertainment sources during the next three months, according to a new report.

Centris Research, in a survey of 7,000 Internet interviews, found that 21% of pay-TV subscribers planned to change their pay-TV service, with 10% downsizing their monthly bill, 8% switching providers and 3% canceling service completely.

The survey underscores a growing trend among pay-TV households that finds cable continuing to lose customers, including 129,000 video subscribers disclosed in Time Warner Cable’s most recent financial report. Satellite TV, which typically subcontracts Internet service from third-parties, is especially vulnerable to burgeoning competition from telecommunication companies and over-the-top services such as Netflix and Hulu, another analyst said.

Pay-TV households are primarily dropping or downsizing service due to the size of the monthly bill (37%), limited use of the channels (21%), the economy (15%) and availability of lower-cost options such as Internet-based video services (10%), among other issues.

Indeed, with telecommunication providers such as Verizon (FiOS TV) and AT&T (U-verse) ramping up their pay-TV platforms, traditional cable and satellite TV providers are under pressure to match service and pricing options.

“It is Centris’ view that defending market share will become increasingly difficult for pay-TV providers with increased levels of competition and new over-the-top viewing options,” said Centris president Bill Beaumont. “Enhanced pricing and bundling strategies, as well as effective use of elasticity programs, will need to be deployed to successfully compete.”

Separately, Phil Leigh with Inside Digital Media said services such as Netflix, Hulu, YouTube and Amazon have successfully pioneered ways to capture viewers’ interest in “long tail” content that can be catered to individual interests.

"Long tail theory implies that while we share interest in popular content, we also have more narrowly defined interests shared with viewer-groups too small to justify mass market distribution,” Leigh wrote in a post. “But the Internet shatters such limitations enabling video content to be made available for vanishingly small audiences. Arguably, cultural programming has already migrated to the Net.”

The analyst added that there exists a “clear and present danger” to satellite operators DirecTV and Dish Network. Their combined 33 million subscribers largely do not receive Internet connectivity through them.

“When satellite TV subs choose to bypass pay-TV by metaphorically ‘cutting the cord,’ they are most often discontinuing service and upgrading ISP service from telephone carriers,” Leigh said. “Consequently, satellite TV operators lose the pay-TV subscriber without benefitting by keeping, and upgrading, the Internet subscriber.”

The analyst said satellite operators are fighting back through rollout of wireless ISP (WISP) networks, which allow consumers living in sparsely populated rural areas the ability to access to the Internet and broadband connectivity is limited. Presently, the WISP market has about 3 million subscribers.


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