Cable Operators

E&Y: Cable Ops Are Media’s Most Profitable

3/21/2011 12:01 AM Eastern

Cable operators have been the most
profitable media and entertainment companies
over the past five years, according to a new study by
accounting giant Ernst & Young.

In its latest report, Spotlight on Profitable Growth:
Media & Entertainment
, Ernst & Young ranked 10
media and entertainment industry sectors on their
average EBITDA (earnings before interest, taxes, depreciation
and amortization) margins between 2006
and 2010. Cable operators came out on top, with an
average EBITDA margin of 38%. They were followed
by interactive media (35%); cable networks (31%);
satellite television (27%); publishing (20%); conglomerates
(19%); and television broadcast (18%).
Film and television production, electronic games
and music finished the list, all with an 11% average
EBITDA margin.

Cable’s performance appears to ref lect the
strength of the bundle — where higher-margin
growth products like high-speed data and telephony
have off set basic video subscriber losses.

Included among the cable operators were publicly
traded domestic MSOs such as Comcast, Cablevision
Systems, Time Warner Cable and Charter Communications,
as well as such international cable service
providers as Liberty Global (Europe), Jupiter Telecommunications
(Japan) and Virgin Media (United
Kingdom).

“The data illustrates that despite a difficult operating
environment, media and entertainment
companies continue to show great resiliency,”
Ernst & Young Global Media and Entertainment
leader John Nendick said in a statement. “Additionally,
we believe that as advertising and consumer
spending continues to rebound, and digital
initiatives blossom, improved growth and profitability
lie ahead.”

Ernst & Young also noted how rising costs for
programming have eaten into profi tability — it cited
several analysts who expect total EBITDA dollar
growth to be about 4% in 2010 vs. 9% in 2009.
But the accounting giant added that new businesses
like commercial services should help keep margins
strong.

In terms of actual EBITDA dollars, the interactive
media sector led the charge, with an average
growth rate of 15% between 2006 and 2010, according
to Ernst & Young. Following were electronic
games (14%); cable networks (10%); cable operators
(10%); satellite TV (9%); film and television production
(7%); conglomerates (3%); publishing (-1%); television
broadcast (-4%); and music (-5%).

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