SNL Kagan’s U.S. Multichannel Subscribers 4th Quarter 2010 Results

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Sector eked out gains, reversing trend of losses from previous two quarters

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The U.S. multichannel sector succeeded in reversing two consecutive quarters of video subscriber losses to achieve positive net adds in the fourth-quarter 2010. The combined gain of 65,000 customers, though weaker than year-ago results, helped boost the industry to a full-year increase of 211,000 customers, according to SNL Kagan estimates of total U.S. video subscribers to cable, DBS and telco video services.

While over-the-top substitution remains a threat to the industry, operators reported that sub trends improved predominantly because of slight housing sector and labor market improvements, along with reduced defection churn from over-the-air converts acquired during the digital transition in June 2009.

According to SNL Kagan's analysis, the multichannel universe grew to almost 100.1 million video subscriptions, a 0.2% gain year-over-year that lags behind progress in the housing picture. The relative impact of the fourth quarter return to subscriber growth was actually tempered by improvements in occupied housing. While a rebound in housing is good news for the industry, the U.S. Census Bureau reported an increase of occupied housing units at a faster clip than sub growth, which points to a decline in multichannel penetration of total and occupied housing units during the quarter.

Despite the inconclusive trend lines between sub adds and sub penetration rates, the fourth-quarter gains do reinforce the importance of multichannel video, and we project more stable macroeconomic conditions will guide the way for absolute video sub adds if not gains in penetration. However, the greater underlying issue remains more screens and alternative platforms competing for users' attention than ever before. The changing content landscape impacts the potential pool of video subs negatively so we expect intra-multichannel competition to escalate while video penetration rates decline over the long-term.

About SNL Kagan
SNL Kagan, a division of SNL Financial LC, is a comprehensive resource for financial intelligence in the media and communications sector, including the broadcasting, cable, entertainment, motion picture, telecom, wireless, satellite, publishing and new media industries. The SNL Kagan suite of products integrates breaking news, comprehensive data and expert analysis into an electronic database available online and updated around the clock. For more information, visit http://www.snlkagan.com

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Christina Twomey
SNL Financial
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