Cable vs. Satellite vs. IPTV Subscribers in the US

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This brief continues MRG’s ongoing analysis of subscribers to US cable, satellite and IPTV operators. All operators have reported their end of year 2012 subscriber data and this brief will investigate trends in subscriber growth for all three types of operators as well any trends in cord cutting in the US. This brief will include data from Q1/2011 to Q4/2012, which is a full two year look at net additions and totals for each type of operator.

As in our previous brief, we are using the top eight pay-TV operators in the US that are publicly traded since they all release quarterly subscriber numbers, including net additions or losses for each quarter. Included are satellite providers DIRECTV and DISH Network, IPTV providers Verizon and AT&T, and cable providers Comcast, Time Warner Cable, Cablevision and Charter. As of Q4/2012, these eight operators accounted for 84,547,000 million pay-TV subscribers in the US.

Although there are many other smaller cable and regional telco TV operators in the US, we have limited this brief to these companies because they account for most of the subscribers.

Figure 1. Top US Pay-TV Operators’ Subscribers, 4Q12

Source: Company financials, compiled by MRG

Subscriber Growth by Technology

Comparing the three different delivery technologies, cable and satellite are still dominant players compared to IPTV. At the end of Q412, about 48.7% of the the total subscribers were using cable, with 40.4% using satellite. From six months ago, when the last research brief was published, cable saw its total drop slightly from 49.4% to 48.7%, while satellite increased by 0.2 percentage points. IPTV had 10.9% of the total, or just 0.6 percentage points more than six months ago. Cable had over 41.2 million subscribers, compared to satellite at just 34.1 million and IPTV at 9.2 million.

Figure 2. Total US Pay-TV Subscribers by Technology

Source: Company financials, compiled by MRG

When looking at net subscriber growth however, IPTV has been leading over cable and satellite. Out of the eight operators, AT&T has had the most net growth for 2011 and 2012 with over 1.5 million IPTV subscribers. Combined, AT&T and Verizon had over 2.8 million net additions. Satellite providers have experienced mixed results. DirecTV managed to add 861,000 subscribers, but DISH dropped 77,000. Cable providers, meanwhile, lost almost 2.3 million subscribers in the last eight quarters. Comcast alone dropped almost 796,000 subscribers in the last two years, with Time Warner Cable close behind. Overall, there is still a net growth of 1.3 million total pay-TV subscribers in the last two years, which is still good news for the industry.

Figure 3. Top US Pay-TV Operators Total Net Subscriber Additions

Source: Company financials, compiled by MRG

Subscriber Growth Trends

As with the net additions per quarter, IPTV operators are also leading when it comes to overall subscriber growth during the two-year period. IPTV has grown 24% in the last two years, satellite increased just 1.6% but cable dropped about 3.1%. The growth rate for the combined total is a relatively low 1.7% for the last two years. Despite the current rate of growth from IPTV operators, their growth has been slowing down in the last few years.

Figure 4. Top US Pay-TV Operators Total Net Subscriber Additions

Source: Company financials, compiled by MRG

MRG Analysis:

Cord Switching Not Much Cord Cutting. It seems that customers are actually not cutting the cord, but simply moving to different cords and switching providers. Pay-TV subscriber growth is still positive for most of the last few quarters, although cable providers have clearly been losing more subscribers than satellite or IPTV. It seems like competition for pay-TV services has clearly hurt cable operators and benefitted IPTV operators.

Some Operators Are Adding Subscribers Again. Despite some low net additions by cable and satellite providers in recent quarters, there are some signs that growth is making a quick come back. For example, Comcast saw its fewest subscriber losses in Q4/2012 (-7,000) than in the past three years. Also, DirecTV managed to reach 103,000 net additions in Q4/2012 after several quarters of losses or small growth. DirecTV was also the only other provider, aside from IPTV companies, with a net gain for the two-year period (861,000).

Cable Providers Continue to Shed Subscribers. Cable providers have lost 2.3 million pay-TV subscribers in the last two years. In fact, the companies tracked here have experienced subscriber losses for all eight quarters from a low of -104,000 in 1Q/2012, to a high of -470,900 in 2Q/2011. This alarming trend shows that the competition is heating up, and customers are clearly dropping video services from cable providers.

IPTV Providers Continue to Gain. Even though IPTV operators are just 10.9% of the total overall number, they are enjoying the fastest growth 24% in the last two years. Both AT&T and Verizon have had positive quarters during this period, although the growth has slowed down a bit from a few years ago. Despite this growth, future subscriber additions will likely slow down. In 2011, IPTV providers had 1.5 million additions, while in 2012 they had just 1.3 million. Combined, that gives IPTV operators 2.8 million net additions for the two years, beating cable and satellite handily.

More Research Needed to Study Long-Term Data. This brief just covers the last two years, 2011 and 2012, or about eight quarters. To get a better understanding of the market’s long-term trends, we will begin looking backward to cover past years to see how the three technologies have fared. It’s also important to note that some pay-TV operators are not covered here, including many regional IPTV and telco implementations and some private or smaller cable providers. 

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