This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cost Key Factor in Pay-TV Losses: Analyst

NEW YORK ( TheStreet) -- The recent decline in pay-TV subscriptions has more to do with higher prices than cord cutting according to analyst Craig Moffett of Bernstein Research.

The second quarter of 2010 marked the first time in pay-TV history that the industry saw a loss in subscribers. The number of pay-TV subscriptions dropped 216,000 in the second quarter, followed by third-quarter declines of 119,000. The Convergence Consulting Group projects that by the fourth quarter of 2011, the number of cord cutters will reach 1.6 million.

As programming costs rise, pay-TV companies boost their prices to offset the pressures and maintain margins.

Moffett found that Dish Network (DISH - Get Report) will implement an average 11% increase in its rate in 2011, which is "by far the largest of the companies in my coverage." With this price hike, the company is also promising a two year freeze to its customers.

"Dish has, in essence, taken three years of increase at a single stroke," Moffett said. "We find the strategy to be a curious one, as it maximizes risk of sticker shock (and therefore churn) at a time when the economy is likely at its weakest, and leaves Dish without the flexibility to reflect cost increases in pricing thereafter."

Time Warner Cable (TWC - Get Report) will see a rate increase in the 7% range, while Comcast's (CMCSA - Get Report) increase is in the 4% range, Moffett said, based on a small sample size of customers. DirecTV (DTV) will bump its price by 4% while Cablevision (CVC - Get Report) will take the "smallest percentage increase at 3%," he said.

"Rising rates speak to the relatively stable competitive dynamics within the Pay-TV space," Moffett said in his Jan. 10 research note. He said that the major risk of the constant rate increases is customer affordability among the entire sector. He believes a more likely explanation for the recent loss in subscribers is the steadily increasing prices.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DTV $0.00 0.00%
CMCSA $60.88 -0.11%
CVC $34.45 1.83%
DISH $46.04 -2.80%
TWC $212.72 -0.02%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs