The Report: Cable Subs Dropping

Why are subscribers cutting their cords?

Big cable operators lost more than 500,000 subscribers during the third quarter, renewing fears among cable execs of mass “cord cutting,” or consumers canceling their pay TV subscriptions, perhaps to watch TV online.

The drop comes on top of SNL Kagan reporting this summer that the U.S. multichannel TV industry in the second quarter posted its first-ever quarterly subscriber loss.

But most on Wall Street argue that the weak housing market and sluggish economy — rather than young folks favoring cheaper online alternatives — have driven the recent trend, as well as the end of promotions during the digital TV transition last summer.

“Consumers who were shell-shocked last year are still pulling back their spending,” says Miller Tabak analyst David Joyce, allowing that the young and tech-savvy increasingly choose broadband alternatives over traditional services.

On the bright side, DirecTV and telecom companies signed up more subscribers during the third quarter (despite declines from Dish Network). And Citadel Securities analyst Vijay Jayant says third-quarter subscriber results beat its estimates, and “video and [high-speed Internet customer momentum] actually accelerated from second-quarter levels.”

But Sanford C. Bernstein analyst Craig Moffett isn’t as optimistic about future growth, especially with increasing online offerings and the ever-present threat of piracy. Including results from such smaller and privately held cable firms as Cox Communications and those that have not yet announced their latest results, he predicts a decline of more than 100,000 video subscribers across the board.

“This kind of equivocal result [won’t] settle the cord-cutting debate,” Moffett says.