Dropped channels, cord cutting and other likely topics on Time Warner Cable call
Time Warner Cable Inc., the nation’s second-largest cable-television operator, reports fourth-quarter results Thursday morning before the market opens. A conference call is slated for 8:30 a.m. Eastern time.
As you digest the report, listen for the following:
1. The company’s latest thoughts on high-speed data additions.
While basic video subscriber growth is the metric people look at first when a cable operator reports earnings, broadband is the key to these companies’ future. As Netflix Inc. founder Reed Hastings said last week, people will need faster Internet speeds to take full advantage of online video applications, and that will benefit cable, both in terms of customer gains and price increases.
Residential broadband customers rose by 11% in the third quarter over the prior year to 10.86 million.
2. CEO Glenn Britt’s comments on the implications of rising affiliate fees, particularly at sports channels and the broadcast networks.
Big sports channels like ESPN, the regional Fox Sports channels and others keep raising the fees they charge pay-TV distributors for the right to carry their programming (mostly because those channels are increasingly having to shell out more dollars themselves for sports rights). At the same time, broadcast networks are being aggressive about demanding retransmission fees from cable and satellite providers; though their mass audiences are declining, they are still very big by modern standards, especially for NFL games and other live events.
While programmers generally win their battles with distributors, Time Warner Cable isn’t just going to roll over. Britt has made it clear that against this backdrop of rising costs, the channels on its systems had better deliver sizable audiences. The company has dropped the low-rated Ovation and Current (right after Al Gore agreed to sell it to Al-Jazeera), and other channels could be eliminated soon.
3. Commentary on cord-cutting, or the absence thereof.
Across the cable industry, the accepted wisdom is that video subscribers are not declining so quickly as to suggest that great masses of people are doing without some kind of pay-TV service. However, the question is whether millenials, now in their tweens, teens or early 20s, will see the need for such a commitment when they are in a financial position to subscribe.
Britt has been consistent in saying the issue is a financial one. “These packages keep getting more and more expensive, the programming gets more and more expensive,” he said at the UBS Global Media and Communications Conference last month. “And I hope the economy gets better, but at the moment there are still an awful lot of people who have been unemployed a long time, and this stuff is just starting to cost too much.”
The chief executive reiterated his call for “packages and prices that are lower for people who just can’t afford it.”
– David B. Wilkerson