The TV Game - 2Q13 Episode

The big losers in the Pay TV game are the cable companies (TWC, BH, Comcast, Charter, Cox, Cablevision, WOW, Suddenlink). The winners are Telco TV like AT&T U-Verse, VZ FiOS and CenturyLink. The DBS companies are facing mixed reviews.

"Dish said total pay-TV subscribers declined about 78,000 in the quarter. The company added nearly 624,000 gross pay-TV subscribers, down from about 665,000 a year earlier," according to Reuters. Also worth noting, "Dish added about 61,000 net broadband subscribers in the second quarter, up from nearly 11,000 a year earlier." Total Pay TV subs is 14,014,000; approx. 310K BB subs. DISH CEO Charlie Ergen has been preoccuppied with other ventures. Namely, trying to buy Clearwire, Sprint and Lightsquared after acquiring DBSD North America and TerreStar.

Due to its first price increase in two years, the Pay-TV ARPU for 2Q2013 totaled $80.90, while the churn rate increased to 1.67 percent. I didn't know it was a $14B annual revenue run. DTV is twice that at $30B.

In 2009, customer acquisition cost for DTV and DISH (including leased equipment) was $712 and $700, respectively. DTV pumps more money into advertising and customer acquisition than DISH.

DirecTV ARPU is $98.73. Average monthly churn is 1.53%. Total subs is 20,021,000 for US not including Latin America.

"DirecTV added 139,000 net subscribers in the United States in the quarter, nearly double the gain of 70,000 that analysts expected, according to research firm StreetAccount." [Reuters] "In contrast, Time Warner Cable said last week that it had lost more than 300,000 video subscribers, while Comcast Corp said it had lost 129,000. Another cable company, Charter Communications Inc, reported a net video subscriber loss of 27,000 on Tuesday."

According to Gary Kim, TWC has it the worst. "Time Warner Cable in the coming year that about 40 percent of the cable company’s service area will be overlapped by AT&T U-verse and Verizon FiOS." TWC is competing head-to-head with the 2 biggest RBOCs, cellcos, lobbyists who now offer TV.

Cable companies have already offset TV revenue losses with High speed Internet and Voice revenues (and profits). However, the cablecos have spent money creating TV stations (especially sports stations and news like Bay News 9 on Bright House). With a declining viewership on their network, can it continue to provide quality content for the viewers?

Telcos are spending huge CAPEX in headends, middleware, set-top boxes, infrastructure, neighborhood gear (U-Verse, FiOS) and marketing dollars to gain TV subs. I guess you need to have about 5 million subs to make the investment and content costs worthwhile.