The cable industry has been on quite a tear for the past four or five years, building out and launching digital TV, high-speed data and, most recently, VoIP services. It’s not surprising, then, that the torrid growth in cable’s new services would cool, and I think that, with the exception of Comcast, cable is going through a growth cooling period.
The latest example is Cablevision Systems, which issued its Q3 06 earnings report this morning. Without a doubt, Cablevision is doing very well, with (non-programming) revenues advancing 18.1% year-over-year and 2.5% sequentially to $1.076 billion. Cash flow, the key profit metric for cable, was up 16.4% year-over-year to $411.5 million.
The other unambiguous piece of good news is that Cablevision posted its tenth straight quarter of basic subscriber gains, a rare track record for the cable industry given that most cable companies are emerging from a period of bruising competition with DBS providers. Cablevision’s core video customer count rose 3.3% year-over-year and .3% sequentially to 3.11 million.
However, Cablevision added around only 94,000 net new digital customers during the quarter, down about 35% from Q3 05 gains and down 7.9% from Q2 06 gains. High-speed data growth cooled too, with the New York metro area operator adding only 72,458 net new modem subscribers during the quarter, down 10% year-over-year and 14.6% sequentially.
Even the company’s popular Optimum Voice VoIP product slowed down its forward march. Cablevision added 113,086 net new voice customers during the quarter, a run-rate that was 7.9% lower than Q3 05 levels and down 7.5% from Q2 06 net telephony additions.
Cablevision’ slow-down is a reflection of its already-high, and indeed industry-topping, penetration of each of these products. By the end of the quarter, Cablevision’s digital TV penetration stood at 76% of total basic subscribers, while its Optimum High-Speed Internet service reached 43.3% of homes passed. Almost one in four homes passed by Cablevision purchased Optimum Voice by the end of Q3 06.
The strong acceptance rate of Cablevision’s products pushed the average revenue per customer to $111.13 per month, the highest in the industry.
Still, growth is what investors want to see. Cablevision plans to take the company private — the timing is right, then. With scorching growth now a thing of the past, and no clear path to the next big thing (except for wireless broadband services, perhaps), Cablevision might be able to draw up orderly business plans without Wall Street breathing down its neck.
| Cablevision Systems Operational Statistics | |||||
| Basic Subscribers and RGUs | 3Q05 | 4Q05 | 1Q06 | 2Q06 | 3Q06 |
| Homes passed | 4.47 | 4.48 | 4.50 | 4.52 | 4.54 |
| Basic subscribers | 3.01 | 3.03 | 3.07 | 3.10 | 3.11 |
| Pro Forma annual sub growth | 2.0% | 2.2% | 2.7% | 3.2% | 3.3% |
| Basic penetration | 67.3% | 67.5% | 68.1% | 68.6% | 68.5% |
| Monthly churn | 2.1% | 1.8% | 1.5% | 1.7% | 2.0% |
| Digital Video | 3Q05 | 4Q05 | 1Q06 | 2Q06 | 3Q06 |
| Digital subscribers | 1.84 | 1.96 | 2.13 | 2.27 | 2.36 |
| Quarterly net sub adds | 0.10 | 0.12 | 0.16 | 0.14 | 0.09 |
| Penetration of total basics | 61.2% | 64.8% | 69.4% | 73.2% | 76.0% |
| Monthly churn | 2.6% | 2.2% | 1.9% | 2.0% | 2.3% |
| High Speed Data | 3Q05 | 4Q05 | 1Q06 | 2Q06 | 3Q06 |
| Customers | 1.60 | 1.69 | 1.81 | 1.89 | 1.96 |
| Quarterly net adds | 0.08 | 0.09 | 0.11 | 0.08 | 0.07 |
| Penetration of total homes passed | 35.8% | 37.8% | 40.1% | 41.9% | 43.3% |
| Monthly churn | 2.4% | 2.0% | 1.7% | 2.0% | 2.4% |
| IP Telephony Voice | 3Q05 | 4Q05 | 1Q06 | 2Q06 | 3Q06 |
| Customers | 0.60 | 0.73 | 0.87 | 0.99 | 1.10 |
| Quarterly net adds | 0.12 | 0.13 | 0.13 | 0.12 | 0.11 |
| Penetration of Optimum Voice | 13.4% | 16.3% | 19.2% | 21.9% | 24.3% |
| Source: Emerging Media Dynamics analysis of company data. © 2006. | |||||
Cynthia Brumfield at 5:53 PM|Comments(0)
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