US cable industry to shed 200K subs thanks to ‘cord-nevers’

Michelle Clancy ©RapidTVNews | 29-11-2011

Needing more bad news like it needs a hole in the head, the cable industry is expected to shed 200,000 net subscribers in 2012, falling to 100.5 million overall, according to Credit Suisse media analyst Stefan Anninger.
The problem, however, isn’t churn or cord-cutters: the problem is what Anninger called ‘cord-nevers’—potential new subscribers that never consider pay-TV in the first place."They are growing up in an Internet-based video culture in which the mantras of 'why would I pay for TV?,' 'pay TV is a rip-off' and, 'I can find that for free on the Web' are getting louder,” Anninger wrote in a research note.
“We fear that some of these consumers will find pay TV far less relevant to their lives than do today’s adults." This underlying consumption shift among tomorrow’s adults will continue to be brought to bear on the traditional pay-TV industry, he added. Expecting modern young people, accustomed to turning to the ‘Net for everything, to shell out $100+ for a cable subscription with largely irrelevant linear content is simply “Pollyannaish” he added, comparing the trend to the fixed-mobile substitution drain the industry has seen as people drop their home landlines in favor of a wireless-only life.
Anninger had previously forecast a net gain of 250,000 subscribers in 2012, but considering that total pay TV subscribers have stayed steady at 100.8 million, while occupied households have grown by 1.25 million, its clear that penetration is dropping.The analyst added that pay-TV penetration fell from 84.1% in the third quarter of 2010 to 83.2% in Q3 2011.
To be clear, Credit Suisse maintains an "overweight" rating on the cable and satellite TV industry and does not expect subscribers ‘to fall off a cliff’ in the next 12 to 24 months, Anninger stressed. However, the trends clearly point to ‘anemic gross adds,’ which is a problem that MSOs will need to address with new market approaches. Cable may have a weapon against the ‘connect volume’ problem in a new initiatives around programming packages that are aimed at the middle- to-low end of the market.
For instance, new customisable packages that allow users to pick and choose the channels they want in the package—so-called a la carte programming—is one approach some MSOs and satellite operators (like DirecTV and Shaw in Canada) are mulling. Also, hybrid packages that bring together a basic tier of linear programming with the Web content universe for an affordable price are on the rise; this approach is proving popular especially among the nimble Tier 3 and rural telco TV operators in the United States.