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Cable Technology Feature Article

November 07, 2008

Cablevision, DirecTV Feeling Economy Pain

By Jessica Kostek, TMCnet Channel Editor

Here are the facts: 1) the economy is terrible and it doesn’t show signs of getting any better any time soon, 2) people are trying to cut corners or look at spending their hard earned cash from every possible angle in order to get the best deal on anything—pencils, computers, apples—anything, 3) TV is not all that important anymore—“Really?”
According to Cablevision and DirecTV (News - Alert) both reported fewer subscribers than expected in the third quarter as the economic crisis forced cash-strapped consumers to cut back on pay television services.
Both companies’ shares, along with other cable and satellite TV providers, fell on Thursday.
"The problem is everybody's flying blind. No one has ever seen a market dislocation like we're seeing now," said Bernstein analyst Craig Moffett. "The pay-TV companies are no more equipped than anyone else to estimate just how bad it could get for consumers," he added.
With competition from Verizon (News - Alert) Communications Cablevision lost 19,000 basic video subscribers during the quarter, worse than the 12,000 loss forecast by analysts at Barclays Capital. Its shares fell nearly 14 percent before recovering to close down 4.3 percent, according to Reuters (News - Alert).
Chief Executive James Dolan of Cablevision spoke on the company's earnings saying that it is "not actively pursuing any further strategic alternatives" such as a sale of assets, due to adverse market conditions.
Cablevision posted a profit of $27.1 million, or 9 cents per share, compared with a year-ago loss of $79.3 million, or 27 cents per share when it recorded losses on a series of investments and interest swap contracts.
The company added they had 58,000 digital phone subscribers, 31,600 high-speed Internet subscribers, and 25,000 digital video subscribers -- all figures below Barclays' forecasts of 75,000, 47,000 and 50,000, respectively.
Revenue grew 15.4 percent to $1.745 billion, while analysts had been expecting a profit of 13 cents a share on revenue of $1.685 billion for Cablevision, according to a poll by Reuters Estimates.
As for DirecTV, Dthey blamed the decline because of a joint marketing agreement with AT&T (News - Alert) Inc in the former BellSouth territories on April 1. It has since signed a new agreement with AT&T, which starts nationally on Feb. 1, reported Reuters.
Chief Executive Chase Carey of DirecTV said he expects to see continued double-digit revenue growth through the end of the year. Carey said on a conference call that DirecTV expects to add "low to mid 200,000" new subscribers in the fourth quarter.
"While we view the pay-TV space as relatively defensive, as the past week's results have shown, no service provider is immune from deteriorating economic conditions, including those positioned at the high-end, such as DirecTV," Goldman Sachs analyst Ingrid Chung wrote in a note to clients.
DirecTV’s net profit raised to $363 million, or 33 cents a share, from $319 million, or 27 cents a share, a year earlier. Revenue rose 15.4 percent to $4.98 billion. Analysts had forecast 35 cents in per-share profit on $4.9 billion revenue.
Still, the fall of people watching television just adds to the gloom of, everything. TV is supposed to be comforting.

Jessica Kostek is a channel editor for TMCnet, covering VoIP, CRM, call center and wireless technologies. To read more of Jessica’s articles, please visit her columnist page.

Edited by Jessica Kostek