Sizing Down Digital-TV Wins7/11/2009 2:00 AM Eastern
Cable operators continue to reap big gains from the digital transition, but they may not be quite as big as they hoped.
Analysts have reduced estimates for subscriber growth from the federally mandated program, which ordered broadcasters to switch off their analog signals by June 12.
One analyst says the bulk of the impact won’t be fully felt until the third quarter. Wells Fargo Securities media analyst Marci Ryvicker estimated that the digital transition would result in 653,000 new pay TV subscribers. That number is down from the 900,000 new customers she had originally predicted.
Ryvicker, like most analysts who follow the publicly traded cable companies, revised her estimates downward after it was revealed that more homes than expected — roughly 16 million of the estimated 18.1 million U.S. over-the-air TV households — requested $40 coupons from the federal government to purchase digital-converter devices that would allow them to continue receiving over-the-air signals. Last month, Collins Stewart media analyst Tom Eagan also reduced his estimates for subscriber growth to about 525,000 new customers for the five major publicly traded cable operators, as well as satellite-TV providers DirecTV and Dish Network plus telcos Verizon Communications and AT&T.
While Eagan and Ryvicker are fairly close on the total number of subscribers the transition will bring, they differ on when they expect the remaining effects to be the greatest. In a June research report, Eagan expected the bulk of the remaining over-the-air customers to sign on to pay TV in the second quarter (about 158,000 homes), while Ryvicker contended that accounting issues would push back the bulk of the impact into the third quarter.
That could spook some investors, who have been keeping a sharp eye on basic subscriber growth and were expecting the transition to soften the blow of continued customer losses for cable.
But the reasoning behind Ryvicker’s prediction is mainly because of accounting issues. According to Ryvicker, cable companies normally tally subscriber numbers one to two weeks prior to the quarter’s end. She estimated that cable operators likely began counting customers on June 15.
Ryvicker estimated that cable operators would reap the biggest benefit from the transition — she predicted that 475,000 new customers would flock to cable, followed by 137,000 for satellite TV and 41,000 additional customers for telco TV.
Most cable operators attracted a fair amount of former over-the-air customers in the first quarter — the digital transition was initially scheduled for Feb. 17, but was extended to June 12 after President Obama took office.
Ryvicker, in a research note last Tuesday, estimated that pay TV added 368,359 new subscribers in the first quarter. That growth is expected to slow down to 122,337 in the second quarter and tick back up to 162,304 in the third quarter, according to Ryvicker’s estimates.
Satellite companies are expected to take the bulk of DTV additions in the second quarter — DirecTV is expected to add 29,777 customers and Dish Network 22,333, compared to 18,255 for Time Warner Cable and 20,374 for Comcast. But that is expected to change in the third quarter, with Time Warner Cable gaining 51,935 new customers and Comcast adding 59,406, while DirecTV and Dish add 1,567 customers and 1,175 customers, respectively.
MAKING THE TRANSITION
Over-the-air customers were expected to make the switch to pay TV in the wake of the federally mandated digital transition. Wells Fargo media analyst Marci Ryvicker estimates how the switch will add to cable, satellite and telco TV operators’ subscriber rolls:
|SOURCE: Individual analyst estimates and company reports|
|Time Warner Cable||80,000||18,255||51,935||150,190|