Cable, satellite TV feel economic pinch

NEW YORK (Reuters) - Cable and satellite TV providers lost more subscribers than ever in the second quarter, as tough economic conditions and stiffer competition from telephone companies hurt performance.

New York cable operator Cablevision Systems Corp and satellite provider DISH Network Corp were on Tuesday the latest publicly traded pay-TV businesses to post worse-than-expected results, sending their respective shares down even more in a market already spooked by concerns about U.S. poor economic outlook.

Cablevision shares tumbled nearly 13 percent by the close trading, while Dish was down 0.3 percent.

"With all the major publicly traded Pay TV providers having reported their results, Q2 looks to have been the weakest in the industry's history," said veteran cable analyst Craig Moffett of Sanford Bernstein.

The U.S. pay-TV sector lost 380,000 subscribers in the quarter, more than double year-ago losses of 160,000, according to Bernstein estimates.

Satellite players Dish and larger rival DirecTV Group had their first-ever quarter of combined losses of 109,000 subscribers.

"There is no question that the pay TV industry growth has slowed dramatically," said Joe Clayton, chief executive of Dish Network, which lost 135,000 customers during the quarter. "The market is becoming increasingly saturated. Industry double-digit growth rates have passed and there will be slower growth as the economy rebounds and new home formations grow.

After several decades of steady growth, the pay-TV sector has run into the perfect storm of a weak economy, poor housing market and competition from new entrants such as phone companies and cheaper online options such as Netflix Inc and Hulu.

All the major publicly traded cable companies Comcast Corp, Time Warner Cable Inc, Charter Communications Inc and Cablevision lost subscribers. But phone company Verizon Communications Inc added 184,000 FiOS TV subscribers, while AT&T Inc added 202,000 U-Verse TV customers.

As the industry matures, companies are resorting to aggressive marketing tactics to attract new users. DirecTV has been giving away its exclusive NFL Sunday Ticket package to subscribers who switch from a rival. Typically, the package of out-of-market football games costs as much as $350 per year.

The housing market was highlighted as another reason for customer losses by Cablevision Chief Operating Officer Tom Rutledge on a call with analysts.

"There is very little housing growth going on right now and there is actually a high vacancy rate. All of that hurts the residential business at the moment," he said.

New York-based Cablevision lost 23,000 video customers in the quarter.

Besides the competition from phone companies, there has long been speculation cable TV is suffering an assault from new types of online video services from Netflix, Hulu and expected services from Amazon.com Inc, Google Inc and Microsoft Corp.

The phenomenon has been described as 'cord-cutting,' where customers drop having any cable service in favor of Web video streaming services that are either free or cost a tenth of the typical video package.

Netflix has added more than 1.8 million subscribers in the second quarter for a total of 24.6 million subscribers. This makes it the second largest video subscription service after Comcast.

"A resurrection of the cord cutting thesis seems almost inevitable here notwithstanding all the evidence that it is the tremendous stress on consumers, particularly at the low end of the market, that is the root cause for the weakness," said Sanford Bernstein analyst Moffett in a client note.

(Editing by Andre Grenon)