Cable is back … sort of.
After posting weaker-than-expected subscriber numbers in the second quarter, two of the country’s largest cable operators reported subscriber gains that beat many analysts’ projections-but they were in the high-speed-data realm, not the companies’ bread-and-butter video business.
Cable giant Comcast last week reported that it added 549,100 new high-speed data customers, while its basic analog cable growth was just 8,500 in the quarter. Cox Communications the same day reported that it added a record 184,500 new high-speed data subscribers in the quarter, while basic analog cable growth was just 18,000.
Call it the new world order for cable operators, at least for now. Thanks to a business that is clearly maturing and to the inroads being made by the satellite operators, cable companies’ growth prospects are no longer in attracting new video customers but rather in luring people to its high-speed data offerings as well as to advanced video services such as video-on-demand, high-definition television and digital video recording devices.
The third quarter is typically supposed to be a period of strong video subscriber growth, as snowbirds and college students who disconnected their cable in the spring and summer reconnect at the start of fall.
Subscribers Fail to Return
However, 2004 has been different. Cable operators in the second quarter lost more video subscribers than many on Wall Street had projected, with Comcast losing 96,000 basic-cable subscribers in the quarter, while Cox lost 54,000. And if Comcast and Cox are considered bellwethers, the sector isn’t making up those losses in the third quarter, which historically has been a robust period.
Any pain suffered by the lack of basic subscriber growth is being offset by the growth in high-speed data, which analysts note is coming at the expense of the Regional Bell Operating Companies.
What is even more encouraging for the cable companies is that the growth in high-speed data users has come without having to discount the service the way the RBOCs have, noted Richard Greenfield, managing director at Fulcrum Global Partners.
The growth in high-speed data helped both Comcast and Cox, which is about to be taken private by the family that controls 62 percent of its shares, post revenue gains in the quarter and offset hurricane-related losses in the Southeast.
Comcast’s overall revenue rose 12 percent to $5.1 billion, driven by an 11 percent increase in revenue for the company’s core cable business. The company reported a third-quarter profit of $220 million, compared with nearly $3.2 billion a year ago, reflecting a $3.3 billion one-time gain related to Comcast’s sale in July 2003 of its 57 percent stake in QVC to John Malone’s Liberty Media.
Cox, meanwhile, posted a profit of $42 million, versus a loss of $215.1 million a year ago. Revenue rose 11 percent to $1.6 billion.