IHS Report: “Threat of Cord-Cutting Has Been Overblown”

EL SEGUNDO: Though video subscribers declined in the second quarter, the U.S. pay-TV market saw revenue-generating units (RGU) for cable rising, according to new IHS Screen Digest U.S. Cable Networks Intelligence research findings.

The number of U.S. households subscribing to pay-TV video services decreased by a total of some 370,000 in Q2. However, total cable RGUs (or individual service subscriber contracts) rose by 238,000 on the strength of increased subscriptions for non-video services, including broadband and telephony.

During the second quarter, U.S. cable operators saw gains of 270,000 broadband subscribers and 593,000 voice-over-Internet-protocol (VOIP) subscribers. This more than makes up for the loss of 625,000 video subscribers, with 59.3 million households still subscribing to cable video services.

Total U.S. pay-TV video subscriptions in Q2 decreased to 100.6 million, down from 101 million in the first quarter. The decrease represented only the third time in history that the U.S. pay-TV video market has suffered a consecutive quarterly decline. However, the Q2 decline comes after a 13,000 increase in video subscribers that occurred in the fourth quarter of 2010, and a 477,000 increase during the first quarter of this year. In actuality, total U.S. pay-TV video subscribers in the second quarter of this year were slightly higher than they were one year earlier—up by some  68,000 compared to Q2 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 percent of all U.S. homes,” said Erik Brannon, analyst for U.S. Cable Network Intelligence and U.S. 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 favor of Internet-delivered video, a phenomenon known as ‘cord cutting.’ This indicates that the threat of cord-cutting has been overblown.”