Domestic Pay-TV Market Shows Resilience

El Segundo, Calif.-based IHS Sept. 9 said the number of U.S. households subscribing to pay-TV video services just as HBO, Showtime, Epix and transactional video-on-demand declined by near 370,000 in the second quarter of the year. Together, the total number of subscribers increased by 238,000 fueled by non-video services just as high-speed Internet and telephone.

"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% 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, however 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."

Indeed, cable operators saw an increase of 270,000 broadband subscribers and 593,000 Internet-based telephone subscribers in the second quarter compared with last year.

IHS said even if cable loses 10% of its video sub base by 2015, operating margins will remain strong due to high-speed Internet and VoIP (Voice over Internet Protocol) services.

"In better times, subscribers were happy to pay for both video subscriptions and for high-speed Internet subscriptions, as evidence by the rapid growth in both in the pre-2008 period," Brannon said. "In the current economic situation, when forced to choose, some consumers appear to see greater value in the latter."

New York-based Knowledge Networks said use of OTT services jumped from 26% in 2010 to 35% in 2011 among users aged 13 to 54. Together, monthly use of connected TVs jumped near 50% — with Web-connected video game console use up 6% to 12%, mobile device viewing up 5% to 10%, and Netflix use up 13% to 26%.