Cable Stagnant, Satellite Booming

Cable TV may be nearing the end of a long growth season, yielding subscribers to competition from satellite services like DirecTV and EchoStar's Dish Network. Recently published figures from Kagan Research LLC show that the cable industry overall has lost 900,000 subscribers over the past two years.

The advent of high-definition TV and the availability of local channels via satellite has only accelerated the process. Satellite services were the first to offer HD, and still offer the widest variety of programming in the high-resolution format. Voom, Cablevision's HD-only satellite service, has technicians working overtime hooking up new customers. In its most recent quarterly report, El Sugundo, CA–based DirecTV (now a unit of News Corp.) reported a gain of 455,000 subscribers after accounting for defections to other providers. Colorado-based EchoStar noted a gain of 360,000 new subscribers in the first fiscal quarter.

By contrast, in late July, Comcast, Cox Communications, and Time Warner—three of the industry's dominant companies—reported a combined 171,000 lost subscribers, according to an August 4 report in The Wall Street Journal. Analysts believe that up to 25% of US viewers now receive their signals via satellite—tremendous growth from what was basically nothing a decade ago. Comprised of what once were local monopolies, the cable industry has been plagued by complaints of price gouging and poor service by consumers who had little choice if they wanted to receive more than local broadcasts. Cable rates consistently rose faster than the rate of inflation, a phenomenon that has been a regular issue in Congress.

Competitive pressure from satellite may change that pattern. Cable rates are typically 30% higher for equivalent program packages, but critics note that cable reception is typically far worse than on a properly installed satellite system. Cable has fought back, reluctantly, by offering some HD programming, and in some markets, digital video recorders (DVRs) built-in to next-generation set-top boxes. Cable companies are also bundling high-speed Internet services with one monthly entertainment package, and satellite companies have responded by entering sweetheart deals with telecom companies such as BellSouth and SBC Communications to provide satellite service to their customers.

The net gain for consumers is wider choice of programming at higher resolution and at far lower cost than has ever been available. It's never been a better time for couch potatoes.