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812,000 pay-TV subscribers cut the cord in the second quarter of 2016

812,000 pay-TV subscribers cut the cord in the second quarter of 2016
An estimated 812,000 subscribers dropped their pay-TV package in the second quarter of 2016, according to SNL Kagan. More consumers are getting their entertainment on phones and computers. (Jamie Grill / Getty Images)

The U.S. television industry continues to grapple with the flight of  customers who are ditching their pay-TV service at a rapid clip.

In a grim reminder of the challenges facing media companies, an estimated 812,000 subscribers pulled the plug on their pay-television service in the second quarter, according to a study by consulting firm SNL Kagan.

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The figure represents a decline in the number of homes that received a bundle of video channels from a cable, satellite or telephone company compared with the first quarter of 2016.

"It is a bit of an acceleration and the biggest quarterly loss that we've seen," Ian Olgeirson, an analyst with SNL Kagan, said Monday in an interview. "We are seeing a gradual increase in the decline rate."

The year-over-year number was more startling. There were nearly 1.4 million fewer pay-TV subscribers in the second quarter of 2016 compared with the second quarter of 2015.

The April-June quarter tends to be the weakest for the pay-TV industry as students and families move at the end of the school year, canceling their TV subscriptions.

Consumers now have more options. Increasingly, they are drawn to online video services such as Netflix, Amazon.com, Hulu and CBS All Access, which can be more affordable when combined with a broadband Internet subscription. Younger users are just as comfortable watching shows on phones and tablets as they are watching them on TVs.

In the second quarter, the telephone sector experienced the greatest losses, an estimated 488,000 homes, but some of that erosion could be attributed to AT&T's efforts to migrate customers to its satellite service, DirecTV.  AT&T acquired the El Segundo satellite-TV service last year. In addition, Frontier Communications took over Verizon's service in several markets, including Southern California.

But even picking up additional customers from AT&T U-Verse wasn't enough to offset a net loss in the satellite-TV sector. Providers dropped a net 26,000 customers compared with the first quarter. Dish Network has been particularly hard hit.

Cable-TV operators have shown strength in the last two years but still experienced a net loss of 298,000 subscribers in the second quarter, the SNL Kagan report found.

Two years ago, the pay-TV industry experienced a net loss of 291,000 subscribers in the second quarter compared with the first quarter. Olgeirson said the first time that SNL Kagan detected a decline in pay-TV subscribers was for the second quarter of 2010.

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