Viewers pull plug on US cable television

Please use the link to reference this article. Do not copy & paste articles which is a breach of FT.com's Ts&Cs (www.ft.com/servicestools/help/terms) and is copyright infringement. Send a link for free or email ftsales.support@ft.com to purchase rights. http://www.ft.com/cms/s/0/a3986a1c-f28c-11df-a2f3-00144feab49a.html#ixzz15ax1S0ak

he number of people subscribing to US cable television services has suffered its biggest decline in 30 years as younger, tech-savvy viewers lead an exodus to web-based operations, such as Hulu and Netflix.

The total number of subscribers to TV services provided by cable, satellite and telco operators fell by 119,000 in the third quarter, compared with a gain of 346,000 in the third quarter of 2009, according to SNL Kagan, a research company.

Although television services offered by telecoms and satellite providers added subscribers over the period, cable operators were hard hit, with subscriber numbers falling by 741,000 – the largest decline in 30 years.

The figures suggest that “cord-cutting” – one of the pay-television industry’s biggest fears – is becoming a reality as viewers drift to web-based platforms.

Online TV services are stepping up their efforts to reach new viewers and become profitable: Hulu, which is owned by News Corp, Walt Disney and NBC Universal, has slashed the cost of its online subscription service by 20 per cent to $7.99 per month and offers a vast array of film and TV programming.

Jason Kilar, Hulu’s chief executive, has maintained that Hulu, which is exploring an initial public offering, complements pay-television services.

Yet the data suggest that the growth of Hulu and Netflix, the DVD subscription company which began testing a $7.99 per month streaming-only service last month, has become problematic for cable operators.

Ian Olgeirson, senior analyst at SNL Kagan, said it was becoming “increasingly difficult” to dismiss the impact of web-based services on the pay-TV industry, “particularly after seeing declines during the period of the year that tends to produce the largest subscriber gains due to seasonal shifts back to television viewing and subscription packages”.

Hulu’s revenues are increasing sharply: the company is projected to generate more than $240m in 2010, up from $108m in 2009. It has extended the number of devices that can access its subscription service to include Sony’s PlayStation 3 console and will add internet-connected devices, including Vizio, LG Electronics and Panasonic Blu-ray players, in the next few months.

Devices such as Apple’s iPad also appear to be accelerating the move away from traditional multichannel television.

Research from The Diffusion Group, a technology research company, found that more than a third of iPad users were likely to cancel their pay-TV subscriptions in the next six months.

The cable industry has launched a vigorous defence against cord-cutting: companies such as Comcast, which has agreed to buy NBC Universal, are backing “TV Everywhere”, which gives subscribers access to channels and programming online, and via their cable box.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.