Joseph O'Halloran ©RapidTVNews | 10-09-2011

Subs may be down and thee threat of cord-cutting may be up but Q2 2011 was good for the US pay-TV industry according to new research by IHS Screen Digest.

Indeed the IHS Screen Digest U.S. Cable Networks Intelligence report showed that despite the number of U.S. households subscribing to pay-TV services declining by a total of nearly 370,000 in the second quarter, with cable TV operators taking the biggest hit, revenue-generating units (RGU) for cable rose robustly due to the expanding broadband and telephony segments. Specifically, individual service subscriber contracts actually rose by 238,000 on the strength of increased subscriptions for non-video services.

Yet there was a slight fall, 0.4%, in Q211 US pay-TV video subscriptions to 100.6 million. To give a measure of the significance of the fall, IHS said that it represented only the third time in history that the US pay-TV video market has suffered a sequential quarterly decline.

Yet it should be noted that in Q42010 there was a 3,000 increase in video subscribers and a 477,000 gain during Q1. This resulted in the total US pay-TV video subscribers in 2011 being slightly higher than they were one year earlier, up by about 68,000 compared to the second quarter of 2010.

“This seesaw pattern of quarterly growth and decline is indicative of a mature industry that has reached a high level of saturation, with subscription video services now being sold to some 85% of all US homes,” explained Erik Brannon, analyst for U.S. Cable Network Intelligence and US TV Intelligence at IHS. “Like any mature industry in a recession, the video side of the business is seeing some softness, but not the kind of steady or accelerating drops one would expect if—as some are suggesting—the American consumer is abandoning pay-TV en masse in favour of Internet-delivered video, a phenomenon known as ‘cord cutting.’ This indicates that the threat of cord-cutting has been overblown.”

Even though the cable industry seems to be defined by a loss of cable video subscribers, in other markets the picture is not that much different. In the US satellite video sector, subs were down by 109,000 during the second quarter, bringing the total to 33.5 million. That said, in the period DirecTV undoubtedly enjoyed high-end success with sports packages and DISH Network consolidated its business for the cost-conscious. However the analyst predicts that both will face pressure from the declining demand for video packages.

The only sector identified by IHS to post video-subscriber gains in the second quarter was IPTV, thanks to the strong performances by Verizon FiOS and AT&T U-verse. The two companies’ subs reached 7.9 million, a net addition of 366,000. IHS goes as far as to say that the IPTV segment is in the strongest position among the three video-providers going forward, predicting a 7.2% growth in the US to 2015.

“The threat of consumers discontinuing video service in favour of the Internet must be viewed in the context of the current economic environment,” Brannon noted. “In better times, subscribers were happy to pay for both video subscriptions and for high-speed Internet subscriptions, as evidence by the rapid growth in both in the pre-2008 period. In the current economic situation, when forced to choose, some consumers appear to see greater value in the latter. But given the high percentage of people who are unemployed or underemployed, IHS believes that the relative stability of sub-counts—especially at the RGU level—is testimony to the value that consumers see in pay-TV services.”