TV subscriber growth to slow in 2007, analysts say
NEW YORK, March 23 (Reuters) - Troubles in the U.S. housing sector are likely to spill over into the pay-television market, where analysts are forecasting a drop in subscriber growth this year.
Experts expect satellite TV operators DirecTV Group Inc. DTV.N and EchoStar Communications Corp. (DISH.O) to see the most marked cool-off.
These companies have traditionally taken the lion's share of new customers because they can service areas outside big cities, where there is little or no cable coverage.
But analysts say these regions are also among the hardest hit by the slowdown in the housing market, which has recently been exacerbated by the recent crisis in the subprime loan market that serves borrowers with weak credit histories.
"I do think that home growth has been a factor in the growth of the satellite subscribers in particular," said UBS analyst Aryeh Bourkoff. "Satellite subscriber growth in our view will slow into 2008 and potentially be negative in some markets where they face more competition from cable."
Home construction in ex-urban areas has slowed, with sales down more than in more-populated suburban neighborhoods since a five-year U.S. housing boom ended in the summer of 2005.
But through 2006, pay-TV subscriber numbers defied forecasts and increased overall, thanks in part to so-called triple play packages that bundled video with phone and Internet services.
In previous years, satellite companies had gained customers, while cable lost them.
According to Leichtman Research, cable, satellite and telephone operators added more than 2.28 million net new subscribers combined, up from 2.1 million in 2005.
Shares of these companies have risen strongly on the back of the subscriber growth, but analysts expressed doubt that it could continue for much longer.
"The market is pricing everyone like there are no winners and losers," said Sanford Bernstein analyst Craig Moffett. "But the market simply isn't growing fast enough to feed this many mouths."
DirecTV and EchoStar signed up 1.88 million subscribers between them in 2006, down from 2.3 million in the previous year, according to Leichtman.
The combined subscriber base of the two companies at the end of 2006 was 28.95 million, with 15.95 million at DirecTV and 13 million at EchoStar.
The top 10 U.S. cable operators, which account for 90 percent of that market, added just 200,000 new subscribers last year for a total base of 65.6 million as they focused on selling more services to existing customers. They lost 215,000 subscribers in 2005.
"Satellite will still get the majority of the growth in 2007, but we think it will be less than 2006 at around 1.75 million," said Oppenheimer analyst Thomas Eagan.
And telephone operators Verizon Communications Inc. (VZ.N) and AT&T Inc. (T.N), which have been building new fiber optic networks to deliver television to customers, have also started to show up in pay-TV data, adding slightly more than 200,000 new subscribers in 2006.
They compete with cable operators like Comcast Corp. (CMCSA.O), Time Warner Cable Inc. (TWC.N) and Cablevision Systems Corp. (CVC.N).
Growth expectations are traditionally lower for cable. That industry derives most of its new business from selling its existing customers more products, including digital phone, digital video recorders and high-speed Internet access, rather than taking on more television subscribers.
((Editing by Lisa Von Ahn; yinka.adegoke@reuters.com; Reuters Messaging: Yinka.adegoke.reuters.com@reuters.net; +1 646 223 6081)) Keywords: PAYTV GROWTH/ . Keywords: PAYTV GROWTH/
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