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DirecTV?NEW YORK – “It’s About Cord-Avoiders and Cord-Nevers, Not Cord-Cutters.”??
That’s how Credit Suisse analyst Stefan Anninger summarized continuing weak pay TV subscriber trends in a Monday report that he compiled with several colleagues.??
Following third-quarter trends that were nearly unchanged, he now expects the multi-channel TV universe to contract by around 200,000 subscribers in 2012 instead of the gain of 250,000 that he had previously forecast. ?
“We are not sounding the cord-cutting alarm. And we do not expect the pay TV universe subscribers “to fall off a cliff” over the next year or two,” Anninger said, emphasizing that he retains an “overweight” rating on the cable and satellite TV industry.
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For the 12 months ending Sept. 30, total pay TV industry subs have remained unchanged at 100.8 million, according to Anninger. “Over the same period, however, occupied households have grown by 1.25 million,” he said. “In turn, pay TV penetration has fallen from 84.1 percent in the third quarter of 2010 to 83.2 percent.”??
Anninger’s conclusion: “The problem is connect volume.” ??With all large operators reporting that video churn continues to decline or remain low, “such a trend implies that recent industry-wide sub growth weakness is about anemic gross adds.”
??In other words: Pay TV executives’ argument that there is little evidence of cord-cutting is “an oversimplification,” the analyst said. “Today’s problem: economically-driven cord-avoiders.”
??After all, the economy has at least in part been responsible for fewer new homes subscribing to pay TV.? However, “the problem is that the longer the economy remains weak, and if over-the-top options improve, the harder it will be to bring these subs back to pay TV,” Anninger said.??
“The real challenge to the pay TV business model are behaviorally-driven cord-nevers,” he said. “These are tomorrow’s householders that are in their teens (and younger) today. They are growing up in an Internet-based video culture, in which the mantra of “why pay for TV?“ and “pay TV is a rip-off,” develop.”
??As they age, some of these consumers will choose pay TV substitutes, potentially hurting future pay TV gross adds momentum. ??Said Anninger: “We will not know the extent of this problem for some time and we need to better understand this group’s behavior before making broader assertions.”
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Email: Georg.Szalai@thr.com?
Twitter: @georgszalai
