Major Operators Alter Growth Focus

Aug 2, 2004  •  Post A Comment

Second-quarter results for three major cable operators last week provided more evidence that multiple system operators are continuing to move away from heavy dependence on video businesses as high-speed data and telephony services provided the bulk of the revenue growth.

Meanwhile, station groups continued to benefit from a recovering advertising economy and hefty political campaign spending.

Though the cable sector had to contend with the seasonal decline in customers common in the second quarter, growth in advanced services such as digital cable, digital video recorders and high-definition TV, along with the continued surge in high-speed data, helped Comcast, Cox Communications and Time Warner’s cable unit post revenue gains.

Comcast, which boasts 21.5 million subscribers, reported a profit of $262 million versus a loss of $93 million a year ago. Revenue jumped more than 10 percent to nearly $5.1 billion. While basic-cable subscriber growth was flat for the quarter, Comcast reported a 21 percent rise in digital cable subscriptions and a 37 percent rise in high-speed data customers. Revenue for new digital services such as on-demand, high-definition television and digital video recorders rose 26 percent in the quarter.

Time Warner Cable reported a 10 percent increase in revenue to $2.1 billion, while operating income climbed 10 percent to $443 million. The company attributed the growth to a 10 percent increase in subscription revenue, a 25 percent increase in high-speed data revenue, higher basic cable rates and a 7 percent rise in advertising revenue. Time Warner Cable managed 10.9 million subscribers, down 21,000 from a year ago, yet the company added 124,000 digital video subscribers for a total of 4.6 million, and added 127,000 high-speed data customers for a total of 3.5 million. Those results contributed to parent Time Warner’s second-quarter profit of $777 million, compared with a year-ago profit of $1.06 billion. The 2003 figure reflected a series of one-time gains, including a settlement with software giant Microsoft and several pre-tax gains, that totaled $528 million. The 2004 numbers take into account charges from the sale of Time Warner’s music business. Revenue rose 10 percent to $10.9 billion.

Cox, with 6.3 million subscribers, reported a profit of $62.7 million, down from $117.7 million a year ago. Revenue climbed 12 percent to $1.6 billion. Cox reported 34 percent year-over-year high-speed customer growth to 2.2 million, with 97,517 additions in the quarter, and 35 percent year-over-year telephony growth to 1.1 million customers, with 66,265 signing up for the service in the quarter.

Station groups generally reported strong quarterly results. Hearst-Argyle Television reported a 32 percent increase in second-quarter profit to $36 million compared with $27.3 million, or 29 cents a share, a year ago. Revenue advanced 10 percent to nearly $198 million, thanks in part to political ads, which hit $12 million in the quarter versus nearly $3 million last year and $8 million for the 2002 second quarter. Advertising revenue from the broadcast of the Summer Olympics next month is expected to garner 3 percent to 5 percent more than the 2000 Summer Olympics, and 20 percent more than the Winter Olympics in 2002.

LIN TV Corp. said it swung to a second-quarter profit of $14.6 million, compared with a year-earlier loss of $11.2 million, on an 8 percent jump in revenue to $96.3 million as the company saw most of its key advertising categories post revenue gains and recorded hefty political advertising spending.

McGraw-Hill Cos., which owns four ABC affiliates, reported a 17 percent jump in second-quarter profit to $165.6 million, up from a year-earlier profit of $142 million. Revenue rose 5 percent to $1.23 billion, in part due to improvements in local ad sales and a bounce from political ads.

Meanwhile, Metro-Goldwyn-Mayer reported a narrowed second-quarter loss of $19.7 million, compared with a year-earlier loss of $133.6 million. Revenue tumbled 17 percent to $406.1 million, largely the result of lower home entertainment revenues compared with year-earlier results.