Subscriber gains and losses in the pay-TV universe
Pay-TV company stock prices went into a free fall in the week of August 3, 2015, as a result of growing fears concerning subscriber losses. Time Warner (TWX) fell by ~9%, and the share price of Discovery Communications (DISCA) fell even more steeply, by 11%. 21st Century Fox (FOXA) and Viacom (VIAB) also fell by 11% and 20%, respectively, that week.
You can get diversified exposure to Time Warner by investing in the SPDR S&P 500 ETF Trust (SPY), which has 0.35% of its portfolio invested in the stock.
Variety recently reported that according to MoffettNathanson, in the first quarter of 2015, Comcast (CMCSA) lost 8,000 video subscribers. Meanwhile, Time Warner Cable (TWC) and DirecTV (DTV) surprisingly gained 33,000 subscribers and 60,000 subscribers, respectively. Dish Network (DISH) saw the biggest loss of 134,000 subscribers in the first quarter of 2015.
Reason for subscriber losses
High, escalating costs are one of the reasons why people are shifting from cable to so-called over-the-top providers such as Netflix (NFLX). This phenomenon is popularly known as “cord-cutting” in the media industry.
Over-the-top subscription provides consumers with program schedule flexibility, convenience, the ability to skip commercials, and the ability to watch multiple episodes sequentially.
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