Cable and FiOS

According to the article, “Pay-TV Subscriber Losses Felt at Cablevision, Dish,” which appeared in the August 10th edition of the Wall Street Journal, declining numbers of video subscribers undercut the improved bottom lines at Cablevision Systems Corp. and Dish Network Corp. These cable operators have been losing video subscribers because of new competition from telecom companies expanding into video, customers opting to cut the cord and watch video on the Web, and lower home sales, which reduce new-customer cable installations.

As described in the article, Cablevision has lost 23,000 video subscribers during the second quarter, reflecting competition from Verizon Communications Inc.’s FiOS in the key New York metro area market. According to analyst Todd Mitchell of Brean Murray Carret & Co., “Cablevision is getting killed by FiOS in NYC suburbs.”

It was also reported that satellite company Dish Network has lost 135,000 subscribers during the same period. However, the company did expect to lose subscribers when it decided not to pursue “low-margin” customers that it felt would leave over time. As a result, Dish Network ended up losing more than the 19,000 that it had lost only a year earlier.

Meanwhile, telecom companies such as Verizon and AT&T Inc. are rapidly gaining subscribers. According to FiOS, in areas such as Farmingdale, Great Neck, Mount Kisco and throughout Staten Island, Verizon FiOS’s percentage of cable customers is well over 50%.

In the New York area, most of Cablevision’s losses can be explained by those who have switched to Verizon FiOS. Over the last year, FiOS showed a total growth of 264,384 in the New York metro area market. The North Nassau zone of Long Island holds 40,186 FiOS subscribers while the South Nassau zone boasts a total of 99,065 subscribers. This compares to 106,000 and 214,000 subscribers in North and South Nassau, respectively, for Cablevision. Overall, in Nassau County, FiOS showed a quarter-to-quarter growth of 8,680 subscribers. Other areas of Long Island continue to grow as well, with the Suffolk County zone holding 71,323 Verizon FiOS subscribers and showing a quarter-to-quarter growth of 5,043 subscribers.

Verizon FiOS has presented a serious challenge to the cable operators. Advertisers should take these numbers into consideration when they plan their cable advertising budgets. It is our opinion that FiOS has now reached critical mass and should be considered as part of any general cable buy. We have found that FiOs advertising is now providing an excellent value as FiOs tries to lure more cable advertisers to its service. For more information, please contact PRMG.