3Q09 Surprises

 

Several surprises came out of the third quarter 2009 and none was bigger than the one that popped up on the quarter’s very last day.  On September 30, word leaked that cable giant Comcast was in talks with GE looking for a deal that would bring the programming bounty of NBC-Universal into its fold.  Today, of course, the ink is dry on the deal and all eyes have turned to Washington D.C. where regulators must give a thumbs up on Comcast’s $30 billion (or somewhat less, depending on how you look at it) gamble for NBC-U.

Should the gamble go through, it could create enormous upheavals in today’s media landscape.  For a quick look at some of the key places and pieces now in play, check out the sections later in this BRIDGE.

A second 3Q eye-opener was widely anticipated on the Street ... but not to the degree that it came through.  After a long, dry period, punctuated by serious subscriber losses, The DISH Network roared back with a 241,000 subscriber gain.  The company promptly launched an ad campaign declaring itself the fastest growing TV provider in the U.S. – a claim which brought howls of disbelief from all over.  So is it true?  For more on DISH’s comeback, see “Is This True?!”.



A third 3Q surprise appeared in the 10Q from Cablevision, arguably the best run cable MSO in the nation.  Under heavy pressure from Verizon FiOS, Cablevision reported its first time ever loss in digital subscribers – a -14,000 dip that could signal the start of even tougher fights across the multiplatform playing field.

So what were some other key stats from the quarter?  To start with, there’s the ever growing video pie.

Video: How Long a Growth Spurt?

 

Virtually, all of the gains –a whopping 800,000+ worth – appeared on the balance sheets of DBS and telco video providers.  And, yes, for this three month period DISH was the fastest growing service, edging out AT&T’s U-verse by just 2,000 net new subs.

The gains enjoyed on the DBS/telco side of the equation hit hard on cable providers.  Overall, the top 10 MSOs lost nearly 385,000 basic cable subs in the three month period.  On the plus side for the cable guys, however, their digital subscription rate has continued to move up, with 586,000 net new digital subs recorded in the third quarter.

The exception, of course, was Cablevision which, as noted, saw its digital rolls decline by 14k subscribers.  The reaction on Wall Street, however, was relatively muted as Cablevision’s 3Q revenues of $1.84 billion and above-consensus EBITDA of $668 million painted a strong financial picture.

Video Subscribers 2Q08 ~ 3Q09

 

Voice: Disappearing Customers

 

The cable crowd continues to have a strong story to tell with their VoIP services – albeit with a potentially poor ending.  In the third quarter of 2009, Comcast, Time Warner, Cox and Cablevision netted more than 2,266,000 new voice customers.  Against this, the top five telco companies (AT&T, Verizon, Qwest, CenturyLink and Windstream) reported a loss of more than 7,288,000 voice subs.  This suggests that – just within this nine company group – somewhere around 5 million landline subscribers cut the cord in the third quarter going to wireless-only services.

This raises questions (but hardly new ones) about the viability of VoIP as a long-term cable profit maker.  It also helps explain the cable companies rush to wireless services as, for example, via the Clearwire venture backed by Comcast, Time Warner and Bright House.

Data: Oh, Happy Days

 

Everybody, it seems, wants broadband services – even, presumably, those folks hiding out in the unserved areas so desperately sought by the FCC.  Even as it continues to wreck havoc with business models, broadband is a gotta have and the nation’s top 12 fiber providers profited mightily from this in the third quarter. 

In a nutshell, our list of 12 top broadband companies gained a total of 1,132,000 net new HSI subscribers in the third quarter.  The biggest gains went to Comcast, Time Warner, AT&T U-verse and Verizon’s FiOS, with the three accounting for more than 80% of the total growth.  Across the past year, broadband mania has been especially good to the two telco providers who together have added more than one million broadband customers to their multiplatform rolls.•

How Big a Behemoth?

 

The answer to the question of “how big” depends, of course, on Washington D.C.  It’s essentially a given that regulators will not let a Comcast/NBC-U combination hold on to all the assets of both companies.  Still, the current holdings of pair the inevitable answer is still ... HUGE.

Just for starters, Comcast is the nation’s largest – by far – cable operator.  With nearly 24 million subscribers it accounts for about one quarter of the nation’s pay TV households.  Add on to this Comcast position as the nation’s No. 3 voice provider, with nearly 7.5 million VoIP subscribers ... plus its position as the No. 1 broadband provider, with 15.7 million subscribers ... plus its existing seven national cable networks, its sports nets, local nets and its huge influence over most of cable’s leading technology plays and you already have one big, big company. 

Now consider NBC-U.  It’s one of the nation’s top four broadcasters, of course.  With 10 owned and operated local stations it directly controls its broadcast content to more than 30.6 million households in 10 DMAs.  Plus, it holds some of the top names in cable nets.  Think USA Network, MSNBC, CNBC and SyFy.  Combine all the households reached by all those cable networks and NBC-U can boast of more than 761 million household touches.  (One touch equals the availability of one NBC-U network to one household.)  Add in the major networks owned by Comcast (including its regional sports nets) and you get 421 million touches.  Put them together and you have more than 1.18 BILLION touches ... or a media mammoth whose cable networks can claim an average of 10 touches into each and every U.S. household.• 

The Cable Center Bibliography

 

If you are interested in reading more about this topic the following is a selection of additional periodicals provided by The Cable Center’s Barco Library.  Dedicated to chronicling cable’s varied and colorful history, The Barco Library houses the largest collection of cable telecommunications equipment, photographs, and marketing and informational materials in the industry. 

Visit www.cablecenter.org for more information.•

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Gubbins, Ed. "Voice, video, data: Which one should you give away?" Telephony [Online Exclusive]  Nov. 18, 2009

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Farrell, Mike. "Cable Ops Report Gains." Multichannel News, Nov. 9, 2009, p. 4.

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Crupi, Anthony. "Discovery gets younger to lure new advertisers." MEDIAWEEK, Nov. 1, 2009, p. 8+.

Umstead, R. Thomas. "USA Network Wins Cable's Quarter -- Again." Multichannel New, Oct. 5, 2009, p. 5.

"The Walt Disney Company Reports Earnings for Fiscal Year 2009." Business Wire, Nov. 12, 2009.

Edgecliffe-Johnson, Andrew, and Kenneth Li. "Americans favour cable and broadband." Financial Times, Nov. 5, 2009, p. 20.

Fernandez, Bob. "Comcast profit up 22.4%; cutbacks hinted." Philadelphia Inquirer, 5 Nov. 2009.

Bart, Peter. "Divide and conquer? Fallout of Redstone's revamp still reverberates." Variety, Nov. 16, 2009, p. 1+.