Cable TV: Not as Big a Loser as Everyone Believes

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Everyone has seen the results of second-quarter earnings reports from pay-TV operators. Subscriptions are down and the drop is going to get worse. Or, maybe not.

Craig Moffett, principal and senior analyst at MoffetNathanson, said in a research note published Wednesday that subscriber losses are not evenly distributed. Satellite providers like Dish Network Corp. (NASDAQ: DISH) and DirecTV, now part of AT&T Inc. (NYSE: T), took the biggest hit and telcos like Verizon Communications Inc. (NYSE: VZ) and AT&T were hit hard too.

Cable providers, however, did much better Moffett is reported to have said:

Cable isn’t just holding its own, it is dramatically improving video even as the sector has trended down. … Still, Cable’s advantages are becoming clearer even as sector contraction accelerates.

Pay TV lost a net 625,000 subscribers in the second quarter, the largest-ever loss in the sector. However, FierceCable cites SNL Kagan as reporting a gain of 608,000 high-speed data customers for the cable companies in the second-quarter, the biggest second-quarter increase since 2008. Said Moffett:

Although we acknowledge that there could certainly be additional downside to subscriber numbers, through increased cord cutting and adoption of OTT [over-the-top] substitutes, we think that the risks are relatively low for now, particularly to cable, given its ability to leverage its competitive broadband product …”

Wells Fargo analyst Marci Ryvicker also noted the investor shift away from content companies and toward distribution companies. She also said:

What seems to have really shaken the market is the fact that we are finally seeing the fraying of the television ecosystem in affiliate fees — which is just tough, as subscription revenue is supposed to be the most stable and the highest margin of any media-type revenue stream.

Both MoffettNathanson and Wells Fargo like Charter Communications Inc. (NASDAQ: CHTR), Comcast Corp. (NYSE: CMCSA) and Time Warner Cable Inc. (NYSE: TWC). Wells Fargo also likes Dish Network but, as FierceCable noted, has “moved to the sidelines” CBS, Disney and Fox.

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