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High Customer Churn Spells Doom for U.S. Pay-TV Operators

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According to a report by Informitv, 10 major U.S. pay-TV operators lost a total of about 663,000 television subscribers in the second quarter of 2016. Notably, the U.S. pay-TV market comprises three kinds of service providers, namely, cable MSOs (multi-service operators), satellite TV operators and fiber-based telecom operators. Significantly, cable TV operators are most susceptible to challenges arising from online video streaming services like Netflix Inc. (NFLX - Free Report) .

Numbers in Detail

Per the report, AT&T Inc. (T - Free Report) , one of the largest pay-TV operator in the world with 37.82 million television customers, gained 342,000 television customers in the U.S. through its satellite subsidiary DIRECTV. However, its U-verse telco television service lost 391,000 customers during the same period. Meanwhile, Comcast Corporation (CMCSA - Free Report) saw its television customer base go down by 4000, ending the period with 22.40 million television subscribers. DISH Network Corp. , the satellite TV provider, lost 281,000 customers. Verizon Communications Inc.’s (VZ - Free Report) Fios television subscribers fell by 1,226,000 largely due to the transfer of its customers to Frontier Communications Corporation . However, organically, it lost 112,000 customers. Optimum and Suddenlink, owned by global cable giant Altice, lost 2,000 and 23,000 subscribers, respectively.

The Path Ahead

The availability of low-priced online video-streaming services offered by the likes of Netflix and Hulu.com is the primary reason for this bleak situation. Multichannel TV offering, the core business area of pay-TV operators, is increasingly slipping out of their hands. In order to counter the competition, the basic ploys are attaining scale, productivity and effective cost management on the part of pay-TV operators. However, many core pay-TV operators have shifted their focus on delivering content through the Internet to counteract the churn rate. Notable examples include DISH Network’s Sling TV and Verizon’s Go90 services.

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