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Forecast: TV Services Spending to Rise

By: David Lieberman, USA Today

NEW YORK — Cable, satellite and phone company video providers should get through the recession relatively unscathed, according to a new report by PricewaterhouseCoopers.

Consumers in 2013 will spend $68.3 billion for basic TV services — up 32.9% from last year, according to the consulting company's widely watched five-year forecast, the Global Entertainment and Media Outlook.

The annual report, out Tuesday, says that though the weak economy will lead to slower growth in 2009 and 2010, the expected economic recovery will drive spending in 2011–13.

It predicts 114.1 million homes will get pay TV services in 2013, vs. 98.4 million last year. That means 95.5% of all homes will receive TV through a wire or a dish, up from 86.8%.

Meanwhile, spending for video-on-demand movies and shows will soar to $4.5 billion, vs. $2.7 billion last year.


"People tend to stay at home more in an economic downturn," says Pricewaterhouse partner Stefanie Kane. "And what do they do? They watch TV."

Lots of investors doubted that premise as unemployment rose, home prices plummeted, and some people grew intrigued with video games and the Internet. Those doubts helped to drive stock prices for cable operators down about 5% thus far this year, while the benchmark Standard & Poor's 500 is up about 2%.

Concerns about the industry have diminished, though, as companies reported encouraging results for discounted triple-play packages of TV, Internet and phone services.

"Most consumers, however cash-strapped, will find room in their budgets for triple-play," Russell Solomon of Moody's Investors Service said in a report last month.

Still, investors in cable companies such as Comcast (CMCSA) and Time Warner Cable (TWX) may find reason for concern in Pricewaterhouse's otherwise upbeat forecast. It says cable's toughest new competitors — phone companies led byVerizon (VZ) and AT&T (T)— will largely drive growth in TV services. Phone companies will have 14.2% of all video subscribers in 2013, vs. 1.9% last year. "We're counting on the telcos continuing to lay lines to get to more people in more places," Kane says.

But Pricewaterhouse has lost some enthusiasm for subscription-based mobile TV services, largely used now in cellphones. Last year broadcasters adopted a technology standard that will enable them to beam TV signals for free to portable devices.

The new forecast says consumers will spend $630 million for mobile video in 2012. That's a big drop from last year, when Pricewaterhouse projected $2.1 billion in spending in 2012. "The business model is still evolving," Kane says.


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