Analyst: Pay TV Subs Hit All-Time High in Q1 Despite Netflix's Growth

3:50 PM PST 05/05/2011 by Georg Szalai

Addressing cord cutting fears, BTIG's Richard Greenfield says online video services "increasingly appear complementary rather than competitive to the existing multichannel video industry."

NEW YORK -- It may not be the end of the cord cutting debate, but big pay TV operators can feel good about themselves as first-quarter earnings season nears its end, with one prominent analyst predicting subscribers will reach a new all-time high.

Satellite TV and telecom players this earnings season reported solid TV subscriber growth, while cable operators kept declines in check and at levels that were largely in line with or better than expectations. On earnings calls, some mentioned an improved economy or better customer service, even though Cablevision on Thursday cited some continuing economic challenges.

As previously reported, Wall Street analysts have expected pay TV companies to end the opening quarter of 2011 with customer gains.

Industry watchers typically use SNL Kagan data as the final tabulation of subscriber trends. But with all major pay TV players having reported their latest results, BTIG analyst Richard Greenfield said in a blog post on Thursday: "It appears that multichannel video subscribers will hit a new peak level of around 100.5 million," compared with the previous high of 100.4 million as of the end of the first quarter of 2010.

That was before the first-ever quarter of pay TV subscriber declines followed by another quarterly drop led to the debate about whether Netflix and other online options may lead consumers to cut their subscription TV cord.

Netflix has grown from about 14 million to 22.8 million U.S. subscribers over the past year, while multichannel video subs have increased about 100,000, Greenfield highlighted. His conclusion: "Over-the-top [online] video services increasingly appear complementary rather than competitive to the existing multichannel video industry."

According to the analyst's calculations, the major publicly traded cable operators, satellite TV firms DirecTV and Dish Network, as well as AT&T's U-verse and Verizon's FiOS TV service added 460,000 TV subscribers in the first quarter, up from 36,000 in the fourth quarter of 2010.

However, additions were down about 14 percent from the strong first-quarter 2010 gain of 537,000, Greenfield pointed out.

And in a sign that the cord cutting debate may not end right away, he expects a decline in pay TV subs in the seasonally weak second quarter, but "less severe" than in the year-ago period. Back then the drop amounted to 216,000, according to SNL Kagan, followed by a third-quarter decline of 119,000.

The full-year 2010 increase in subscribers amounted to 211,000. Said Greenfield: "We believe full-year [pay TV] industry additions will be positive and likely above 2010’s full-year levels."

Email: Georg.Szalai@thr.com
Twitter: @georgszalai

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