New Negative Metric: Costs Per Subscriber
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ThE MaStEr
2010-09-27
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New Negative Metric: Costs Per Subscriber
By Mike Farrell -- 9/27/2010 12:01:00 AM
While programming costs have risen at a predictable rate for the country’s two largest cable operators over the past two years, a steady decline in video customers translates to a quicker rise in costs per subscriber.
Time Warner Cable chairman and CEO Glenn Britt mentioned that disparity at last week’s Goldman Sachs Communacopia conference.
While TWC’s overall programming costs rose 6.5% in 2009, programming costs per Subscriber increased by 8.3% that year. In 2010, it is estimated that programming costs per subscriber will rise 9.7% while overall programming costs rise at a steady 6.5%.
The culprit is continued video customer losses, Britt said. TWC lost about 104,000 basic video customers in 2008, 210,000 in 2009 and so far this year has shed about 157,000 basic-video subscribers. Analysts expect the second-largest cable operator to lose about 377,000 basic video subscribers in 2010.
At top cable company Comcast, programming costs rose about 8.8% in 2009, while per-subscriber costs increased 11.6%. For 2010, it is estimated that programming costs per subscriber will rise about 12.3% if overall programming increases remain steady at 8.8%.
Pointing to per-subscriber levels allows cable companies to highlight that programming costs play a large role in overall rate increases, which can have a public-relations benefit.
But the subscriber losses themselves were more on the minds of TWC investors last week. Since chief fi nancial officer Rob Marcus said on Sept. 15 that primary service-unit growth (a combination of basic video, voice and data customers) could turn negative in the third quarter, mainly due to declines in new home growth, the MSO’s stock price has fallen 6% ($3.28), to $51.65 on Sept. 23 from $54.93. Britt’s remarks at Communacopia added to the decline.
At right, a closer look at subscriber trends at the top two operators.
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