Analysts Claim - Viewers not deserting Pay TV for Internet Options (viz Cord Cutting)

Just read this piece from the Buffalo News and wondered aloud, but how long before this trickle becomes a tide - NetFlix already has 20 million customers - with OTT becoming more pervasive. I see not poverty, but a more fair and transparent pricing as well as a more democratic distribution of content as being the driver for cord-cutting.

Last month, No. 4 video provider Time Warner Cable Inc. said it lost 141,000 video customers to end at 12.3 million. But AT&T’s U-verse added 246,000 to nearly 3 million, and Verizon Communications’ FiOS added 182,000 to end at 3.5 million.

“The notion that people are disconnecting their pay TV connections in favor of Netflix has always been a good story, but there’s been very little evidence that it’s actually happening in any material numbers,” Bernstein analyst Craig Moffett said.

Netflix Inc. added 3.1 million customers in the last quarter, rising to more than 20 million. Its service is cheaper but doesn’t include live programming and still requires paying for a separate Internet connection.

Subscriber losses from top-ranked Comcast Corp. and eighth-ranked Cablevision Systems Corp. reflected one-time items, such as the defection of customers angry over a two-week blackout of Fox programs on Cablevision in October.

Comcast’s loss of 135,000 video subscribers was about a third less than expected as it held onto more customers with better programming, and fewer people dropped service with the expiration of promotional prices offered during the 2009 transition to digital over-the-air broadcasts. Comcast ended with 22.8 million video customers, and Cablevision had 3.3 million.

Those losses were more than erased by gains at such rivals as AT&T Inc. and Verizon, which offer video services over phone lines.

Along with a gain of about 130,000 video subscribers combined at satellite operators DirecTV and Dish Network Corp., the established pay TV industry is on track to add 200,000 to 250,000 TV subscribers in the final three months of 2010, according to Nomura Securities.

The gains are “another piece of evidence that cord-cutting is not impeding subscriber activity,” Mike McCormack and Mike Liddell, Nomura analysts, said in a research note.

Cord-cutting refers to the phenomenon of people dropping pay TV packages with the growth of online video offerings through Hulu, Netflix and other services.

The results showed the traditional pay TV industry was not succumbing to cord-cutting activity and has returned to normal following the end of discounted pricing, analysts said.

Some cable operators had offered TV services for as little as $10 a month in the summer of 2009 to ease the transition to digital that made analog rabbit ears useless for receiving over-the- air broadcasts. When those prices reverted to normal after a year, many people switched back to rabbit ears — just new ones capable of receiving digital signals.

Industrywide gains in video subscribers also signaled to some analysts that people could afford paying for television again as the economy recovered.

“The real pressure on the pay TV operators has tended to be at the very low end of the market,” Moffett said. “And that reflects more on issues of poverty than on issues of technology.”